MONTREAL — Canadian National Railway saw modest revenue gains as wildfires and a work stoppage slowed operations in the third quarter in financial results announced today (Tuesday, Oct. 22).
Revenue was $2.97 billion in the quarter ending Sept. 30, up 3% from the year-ago quarter. Operating income of $1.1 billion was unchanged from a year ago.
The railroad’s operating ratio was 63.1%, up 110 basis points from the same period a year ago.
Earnings totaled $1.72 per share, up 2%.
“Our scheduled operating plan demonstrated its resilience in the third quarter, allowing us to adapt our operations to challenges posed by wildfires and prolonged labor issues,” CEO Tracy Robinson said in a press release after markets closed. “Our operations recovered quickly and the railroad is running well. As we close 2024, we will continue to focus on recovering volumes, growth, and ensuring our resources are aligned to demand.”
On a call with analysts, Robinson said the railroad was “a well-oiled machine” after rebounding from summer wildfires that shut down operations in parts of Alberta, and a labor dispute in late August that led CN and competitor CPKC to briefly lock out union employees. The Canadian Industrial Relations Board issued a back-to-work order at the request of the federal government. Robinson said the arbitration process that began with the CIRB order was well underway. She added that margins had been affected by the wildfires and lockout.
Intermodal was hard hit by the work stoppage and Robinson said CN expects a gradual return for international intermodal, in particular the mix of U.S. business through the Canadian west coast container ports of Vancouver and Prince Rupert, British Columbia.
Volume gains were led by long-haul international intermodal and petrochemical products, as well as stronger Canadian grain exports. But overall intermodal revenue was flat on lower domestic business and Robinson noted mixed signals around consumer confidence. Labor uncertainty, market softness and an oversupply of truck capacity contributed to a softer macroeconomic environment than management had anticipated, and one she sees continuing into next year.
In a bid to balance capacity utilization with demand, CN parked 140 locomotives in the quarter and reduced intermodal platforms by 20%. While the company formulates its business plans for 2025, Robinson said she expects a lower OR in the fourth quarter with improved margins on “fairly strong pricing” through this year.
“A key challenge is recovering the U.S. mix through Western intermodal gateways; that is a focus,” said Robinson. “There should be a 60/40 Canada/U.S. mix. It’s closer to 80/20 as we recover.”
Key performance metrics — car velocity and dwell — were flat. Car velocity was 208 miles per day for the quarter, compared to 209 miles in the third quarter of 2023, while through dwell remained at 7.1 hours. The railroad’s local service commitment — measuring cars completing their daily operating plan — improved to 94% from 91% in the third quarter of 2023.
