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Like many of its U.S. Class I counterparts, CN had to deal with significant flooding in the second quarter. The Canadian Class I also faced forest fires and mudslides. But despite those challenges, CN registered “solid” second-quarter financial results, said President and Chief Executive Officer Claude Mongeau in a prepared statement.

In Canadian dollars, adjusted/diluted earnings per share (EPS) climbed 12 percent to $1.26, revenue rose 8 percent to $2.26 billion, operating income increased 8 percent to $874 million and adjusted net income inched up slightly less than 1 percent to $538 million compared with second-quarter 2010 figures. Analysts polled by Thomson Reuters had expected EPS of $1.25 and revenue of $2.26 billion. In addition, carloads increased 4 percent to 1.2 million units and the operating ratio remained essentially flat at 61.3.

“CN railroaders responded quickly and effectively to a series of weather challenges,” said Mongeau. “Their tireless efforts and dedication helped to protect the integrity of our network, the reliability of the supply chain we serve and our service to customers.”

Revenue ton-miles rose 5 percent and rail freight revenue per revenue ton-mile increased 4 percent year over year. By commodity group, revenue climbed 17 percent to $245 million for metals and minerals; 14 percent to $454 million for intermodal; 13 percent to $368 million for grain and fertilizers; 6 percent to $317 million for forest products; 5 percent to $162 million for coal; 3 percent to $340 million for petroleum and chemicals; and 2 percent to $130 million for automotive.

Intermodal — CN's largest revenue segment — was a “bright spot,” driven by higher import volumes at the ports of Vancouver and Prince Rupert, British Columbia, and increased domestic retail shipments, said Mongeau. Domestic retail business will continue to benefit from the acquisition of 1,400 new containers, according to CN.

"Intermodal was one of the first areas where we applied our new end-to-end supply chain collaboration approach," said Mongeau. "This approach is really starting to pay off, and we hope to enjoy gains in other segments of our business where we have brought forward a similar focus on innovation and service excellence.”

However, operating expenses increased 8 percent to $1.4 billion primarily due to higher fuel, purchased services and materials, and labor and fringe benefits costs. Fuel expenses soared 38 percent to $353 million, purchased services and materials expenses climbed 7 percent to $268 million, and labor and fringe benefits expenses rose 4 percent to $432 million.

Looking ahead, CN expects to generate double-digit diluted EPS growth of up to 15 percent for the full year, on an adjusted basis.

“While there is some growing uncertainty about the pace of growth of the U.S. and global economies, we believe our performance in the first half positions us to finish the year on a positive note,” said Mongeau.