(Source: Canadian National Railway press release, October 25, 2022)
MONTREAL — CN today reported its financial and operating results for the third quarter ended September 30, 2022. Diluted earnings per share (EPS) of C$2.13 increased by 40% on an adjusted basis, which represents a quarterly record. (1) Diluted EPS decreased by 10%, mainly due to a merger termination fee received in the same quarter of 2021. CN delivered strong top-line growth and yield, as operational advancements continued to drive improvements to key metrics, including car velocity, dwell, and train speed.
“Our back to basics approach continues to drive strong results. CN’s team of railroaders is doing a great job in delivering service to our customers and value for our shareholders. We remain focused on disciplined execution of our integrated operating plan to maximize the effectiveness and efficiency of our incredible three-coast network. We have a busy fourth quarter, with a strong start in the Canadian grain crop, and we are resourced for the months ahead. We are pleased to be raising our 2022 outlook to reflect our performance.” — Tracy Robinson, President and Chief Executive Officer, CN.
Financial results and operating highlights
Third-quarter 2022 compared to third-quarter 2021
- Record revenues of C$4,513 million, an increase of C$922 million or 26%, mainly due to higher fuel surcharge revenue driven by higher fuel prices, freight rate increases and the positive translation impact of a weaker Canadian dollar.
- Record operating income of C$1,932 million, an increase of 44%, or an increase of 31% on an adjusted basis. (1)
- Diluted EPS of C$2.13, a decrease of 10%, mainly due to a merger termination fee received in the third quarter of 2021.
- Diluted EPS increased by 40% on an adjusted basis, which represents a quarterly record. (1)
- Operating ratio, defined as operating expenses as a percentage of revenues, of 57.2%, an improvement of 5.5-points, or an improvement of 1.8-points on an adjusted basis. (1)
- Free cash flow for the first nine months of 2022 was C$2,924 million compared to C$2,034 million for the same period in 2021. (1)
- Injury frequency rate (3) decreased by 29% and the accident rate (4) decreased by 19%.
- Car velocity improved by 5% and dwell improved by 9%.
- Fuel efficiency improved by 1% to 0.838 US gallons of locomotive fuel consumed per 1,000 gross ton miles (GTMs).
- Origin train performance averaged 87%, an improvement of 12% compared to 78% for the same period in 2021. (5)
New 2022 financial outlook (2)
CN is now expecting to deliver approximately 25% of adjusted diluted EPS growth (compared to its April 26, 2022 target of 15-20%) and free cash flow of approximately C$4.2 billion in 2022 (compared to its April 26, 2022 target range of C$3.7 billion – C$4.0 billion). (1) CN continues to target an operating ratio below 60% and a ROIC of approximately 15% in 2022. (1)
Third-quarter 2022 revenues, traffic volumes and expenses
Revenues for the third quarter of 2022 were C$4,513 million, an increase of C$922 million, or 26%, when compared to the same period in 2021. The increase was mainly due to higher fuel surcharge revenue driven by higher fuel prices, freight rate increases, higher Canadian export volumes of coal via west coast ports, higher volumes of U.S. grain and the positive translation impact of a weaker Canadian dollar.
Revenue ton miles (RTMs), measuring the weight and distance of freight transported by CN, increased by 5% compared to the year-earlier period. Freight revenue per RTM increased by 22% compared to the year-earlier period, mainly driven by higher fuel surcharge revenue driven by higher fuel prices, freight rate increases and the positive translation impact of a weaker Canadian dollar.
Operating expenses for the third quarter of 2022 increased by 15% to C$2,581 million, mainly driven by higher fuel prices and the negative translation impact of a weaker Canadian dollar; partly offset by Transaction-related costs of $84 million recorded in the third quarter of 2021 resulting from the terminated CN Merger Agreement with Kansas City Southern (“KCS”).
Full story: www.cn.ca