(Reuters circulated the following article on January 24.)
VANCOUVER, British Columbia — Canadian National Railway Co. posted a 14 percent jump in fourth-quarter earnings on Tuesday, crediting stronger pricing and productivity gains.
The railroad, Canada’s largest and No. 5 in North America, also announced a two for one stock split in the form of a stock dividend and a 30 percent increase in its quarterly cash dividend.
CN Rail’s stock hit a 52-week high of C$96.95 at midday on Tuesday, and ended up C$1.89, or 2 percent, on the day at C$96.33. The earnings and stock announcements were made after the close of trading.
Canadian National joins a parade of major North American railroads posting higher quarterly earnings and it told analysts it remains confident of meeting its previous earnings guidance of 10 to 15 percent earnings per share growth in 2006.
“I’m very pleased by the momentum of the fourth quarter and what is continuing in the first quarter this year of the raw productivity and metric gains,” Chief Executive Hunter Harrison told analysts.
The carrier said it had a net income of C$430 million, or C$1.56 per diluted share, in the latest quarter. That compared with a profit of C$376 million, or C$1.29 a share, in the same quarter a year earlier.
Analysts surveyed by Reuters Estimates expected earnings of between C$1.423 per share and C$1.58 per share, with a mean estimate of C$1.536 per share.
The railway, which operates in both Canada and the United States, said its operating income rose 19 percent to C$720 million, while its operating ratio — a measure of efficiency — improved to 61.8 percent in the quarter .
Revenues were C$1.89 billion in the quarter, up 9 percent, with higher returns from intermodal, minerals and automotive hauling business, Canadian National said.
Operating expenses increased by 3 percent to C$1.17 billion, but cost increases were partially offset by the strengthening of the Canadian dollar, the Montreal-based railway said.
Chief Financial Officer Claude Mongeau said costs would have been flat but for higher fuel prices. He warned that diesel prices were a “headwind” and running above what was expected when CN gave its 2006 earnings guidance in November.
Only about 17 percent of the railway’s fuel expenses for 2006 are hedged, and most of that in the first quarter, as the company used fuel surcharges to cover price increases in diesel for its locomotive fleet.
CN has signed several car-routing and trackage rights agreements with rival carriers over the past two years to increase productivity, and Harrison said he could announce two or more deals by the end of the first quarter.