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In the third quarter, top-line momentum translated into solid bottom-line financial results for CN, said President and Chief Executive Officer Claude Mongeau during an earnings webcast and teleconference yesterday. Those results include an operating ratio below 60.

On an adjusted basis, diluted earnings per share climbed 23 percent to $1.46, operating income rose 12 percent to $938 million and net income jumped 19 percent to $659 million (all in Canadian dollars) compared with third-quarter 2010 figures. In addition, revenue increased 9 percent to $2.3 billion, carloadings rose 4 percent to 1.3 million units and CN’s operating ratio dropped 1.4 points to 59.3.

The Class I registered nearly across-the-board growth, with every business sector posting revenue gains, said Mongeau. On an adjusted basis, metals and minerals revenue jumped 26 percent to $274 million; automotive revenue climbed 15 percent to $117 million; intermodal revenue rose 14 percent to $480 million; forest products revenue ratcheted up 12 percent to $325 million; petroleum and chemicals revenue went up 10 percent to $361 million; grain and fertilizers revenue rose 9 percent to $336 million; and coal revenue increased 4 percent to $166 million. Intermodal continues to be a core growth engine for CN, said Executive Vice President and Chief Marketing Officer Jean-Jacques Ruest.

“We have record revenue performance, a good balance between a solid volume increase and good pricing, and overall, if you adjust for currency, our revenues are up 12 percent over the last quarter,” said Mongeau. “And that's reflective of our ability throughout the quarter and since the beginning of the year to outpace the general rate of economic growth.”

However, total operating expenses rose 10 percent to $1.4 billion primarily because fuel costs shot up 41 percent to $350 million and purchased services and material costs climbed 10 percent to $271 million. In the quarter, fuel prices escalated more than 40 percent on a year-over-year basis, said EVP and Chief Financial Officer Luc Jobin.

Because of the solid third-quarter results and market conditions so far in the fourth quarter, CN execs aren’t seeing any signs of another recession, said Jobin. The third quarter showed a lot of momentum, so the senior team feels optimistic, added Mongeau.

“We’re closely watching the economy, but sticking to our game plan,” said Mongeau.

— Jeff Stagl