MONTREAL — Canadian National posted record third-quarter financial results on Tuesday and boosted its outlook for the full year due to a combination of operational improvements, strong pricing gains, and traffic growth.
CEO Tracy Robinson, who joined the railway on Feb. 28 and prioritized getting back to operational basics, said she was proud of the way the focus on running a scheduled network made service more reliable and the railway more efficient.
“The team is delivering on what we said we would do,” Robinson told investors and analysts on the railway’s earnings call.
“We’ve been focused … on running to the plan, ensuring trains leave on schedule,” Chief Operating Officer Rob Reilly says. On-time train originations were 87%, a 12% increase from a year ago. More trains arrived on schedule during the quarter, too, but CN did not disclose its on-time arrival performance.
CN’s network sped up, with car velocity reaching 212 miles per day, the highest level since 2016. Thanks to the more fluid operation, the number of unplanned recrews fell 38% compared to a year ago, Reilly says.
CN reported record revenue, operating income, and adjusted earnings per share. Quarterly operating income rose 44%, to $1.9 billion, as revenue rose 26%, to $4.5 billion. Earnings per share, adjusted for the impact of one-time items related to CN’s ill-fated merger with Kansas City Southern, grew 40%.
The railway’s operating ratio improved 1.8 points, to 57.2%, adjusted for the impact of one-time items.
CN raised its outlook for the year. It now expects earnings per share to grow around 25%, up from its previous forecast of 15% to 20% growth.
Traffic was up 3% in the quarter when measured by carloads and containers, or 5% based on revenue ton-miles, the preferred metric of the Canadian railways.
CN sees signs that the economy is slowing down, but expects its fourth quarter volumes to remain strong due to a large Canadian grain crop and strong demand for coal, potash, fertilizer, automobiles, and lumber.
Overall intermodal volume was flat for the quarter, but container volume was up 21% at the Port of Halifax, Nova Scotia, where CN this summer launched a second daily pair of intermodal trains.
Chief Marketing Officer Doug MacDonald says CN expects to see significant domestic intermodal growth after strengthening its relationship with Union Pacific and Norfolk Southern in the EMP domestic container pool. CN will invest in 2,500 new EMP containers through 2025.
The EMP program may boost domestic intermodal volume by 5% over the long term, MacDonald says, and should help CN increase its cross-border intermodal traffic.
CN is the only Canadian railway participating in the EMP program after Union Pacific booted Canadian Pacific from the container pool effective Oct. 8.
