CN Rail's 2013 profit forecast disappoints, shares dip

Tue Jan 22, 2013 10:55am EST
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By Susan Taylor

TORONTO (Reuters) - Canadian National Railway (CNR.TO: Quote) forecast a 2013 profit on Tuesday that fell short of analyst expectations, sending shares of the country's biggest rail carrier lower even as it posted higher quarterly earnings and increased its dividend.

CN shares, which have climbed some 19 percent over the past year, dropped just over 1 percent in early trade on Tuesday after the railway said it is aiming for growth in earnings per share in the high single digits, in terms of percentage.

That implies earnings of C$6.11 a share, said BMO Capital Markets analyst Fadi Chamoun, a figure that trailed his earlier forecast of C$6.15 and the mean analyst estimate of C$6.22, according to Thomson Reuters I/B/E/S.

Canaccord Genuity analyst David Tyerman said he had estimated 2013 earnings at C$6.05, an 8 percent increase that reflected increased pension costs that the company warned about last quarter.

"This has to be taken into context," Tyerman said. "The stock is up a good amount over the last year and we're not exactly down a huge amount, we're down just over 1 percent. So it's hardly telling you it's a disaster."

The company's stock may not be "priced for perfection," he added, but there are high expectations from the railway, which boasts top-notch operating efficiency.

CN's operating ratio, a key measure of a railway's productivity, improved by 1.1 points to 63.6 percent in the fourth quarter. The lower the ratio, which calculates operating costs as a percentage of revenue, the more efficient a railway.

For all of 2012, the ratio was 62.9 percent, a 0.6 point improvement over 2011.   Continued...