Strike, 'weak' freight demand hit CN's bottom line in Q4

CN yesterday announced that fourth-quarter 2019 financial results were affected by an eight-day labor strike and "weak" freight demand, resulting in decreases in revenue, earnings per share and operating income.

During the quarter compared with the previous year's quarterly results, revenue declined 6 percent to CA$3.6 billion; diluted earnings per share (EPS) fell 22 percent to CA$1.22, adjusted diluted EPS dropped 16 percent to CA$1.25; and operating income and adjusted operating income each tumbled 16 percent to CA1.2 billion and CA$1.25 billion, respectively.

CN posted an operating ratio (OR) of 66 percent, up 4.1 points, and an adjusted operating ratio of 65.2 percent, up 4 points, compared with Q4 2018, CN officials said in a press release.

For full-year 2019 versus 2018, CN logged revenue of CA$14.9 billion, up 4 percent; a diluted EPS of CA$5.83, down 1 percent; an adjusted EPS of CA$5.80, up 5 percent; operating income of CA$5.6 billion, up 2 percent; and an adjusted operating income of CA$5.7 billion, up 3 percent.

CN posted a 2019 OR of 62.5 percent, up 0.9 points; and an adjusted OR of 61.7 percent, up 0.2 points.

"We remain focused on executing our strategy of long-term sustainable growth at low incremental cost,” said CN President and Chief Executive Officer JJ Ruest. "Our strategic deployment of technology, the next step in our precision scheduled railroading model and our next driver of value, is well underway. At the same time, we continue to closely monitor the freight volume environment and rightsize our resources and costs to demand.”

Over the past two years, the Class I has spent CA$7.4 billion in capital expenditures to increase the network's capacity, efficiency and resiliency, Ruest said.

"In 2020, CN our capital program will decrease to CA$3 billion, generating higher free cash flow," he said. "CN's strong balance sheet provides us with the financial flexibility and resiliency required in the current turbulent economic environment.”

Also this year, CN has growth opportunities that company officials anticipate will translate into low single-digit volume growth in terms of revenue ton miles, "despite continued weakness in the broad freight environment," Ruest added.

The company is targeting EPS growth in the mid single-digit range this year compared to adjusted diluted EPS of CA$5.80 in 2019.