CN boosts financial outlook after posting strong Q2

CN yesterday raised its financial outlook for the second half of the year after reporting  strong second-quarter results.

Net income for the quarter rose 27 percent to CA$1.31 billion, or CA$1.77 per share, from CA$1.03 billion, or CA$1.36 per share, a year ago. Adjusted diluted earnings per share were CA$1.51, up from CA$1.34 last year.

Operating income grew 7 percent to CA$1.5 billion, while revenue rose 9 percent to CA$3.6 billion over last year's quarter.

Operating expenses for the quarter climbed 10 percent to CA$2.1 million compared with last year. CN posted an operating ratio of 58.2 percent, an increase of 0.7 points over second-quarter 2017, but an improvement of 9.6 percents over the ratio in first-quarter 2018.

"Our entire team pulled together quickly to turn around our operational performance following a challenging winter, delivering a best-in-class operating ratio of 58.2 percent in the quarter," said President and Chief Executive Officer JJ Ruest in a press release. "Record capital investments in new equipment and expanded infrastructure are on schedule, as we advance important projects that will give us the capacity and resiliency to serve the market at the industry-leading standard we and our customers expect."

With those investments and new transportation crews in the field, the company has the momentum for a strong second half, said Ruest, who was officially appointed president and CEO this week.

CN now aims to deliver 2018 adjusted diluted earnings per share in the range of CA$5.30 to CA$5.45, versus last year's adjusted diluted earnings per share of CA$4.99, CN officials said. In April, CN's financial outlook called for a 2018 adjusted diluted earnings per share in the range of CA$5.10 to CA$5.25.

The company also has increased its 2018 capital program by CA$100 million to CA$3.5 billion, with additional capital spending primarily going toward the purchase of new rail cars.

CN's revenue increase was attributed mainly to higher volumes of Canadian grain, coal, overseas intermodal traffic, frac sand, refined petroleum products and U.S. grain; freight rate increases; and higher applicable fuel surcharge rates. They were partly offset by the negative translation impact of a stronger Canadian dollar.

Carloadings for the quarter climbed 6 percent to 1.5 million compared with the year-ago period.

The increase in operating expenses was mainly driven by higher fuel prices, higher labor costs and higher purchased services and material costs, CN officials said.