TORONTO (Reuters) - Canadian National Railway Co (CNR.TO) reported stronger than expected second-quarter earnings and said it continues to expect double-digit growth in earnings per share for the full year on Monday, even as shipment volume slipped.
Several analysts had expected Canada’s biggest railway to cut its full-year earnings forecast as weak coal and grain volumes weighed on revenue.
CN did scale back some forecasts, saying it is no longer counting on growth in shipments of crude oil and frac sand, previously forecast to increase by 40,000 carloads in 2015.
It said it now expects those volumes “generally comparable with 2014” in the full year, where it had previously forecast 3 percent growth.
Chief Executive Claude Mongeau said CN has frozen hiring and laid off about 600 workers. Most should be recalled by the second quarter of next year, he said, as other workers retire or leave.
“It was a bit of a tough environment from a growth standpoint, but I‘m really pleased overall, still, with our top line performance,” said Mongeau on a call with analysts and investors
Edward Jones analyst Jeff Nelson said the earnings forecast was the most important part of the results, but also said the company’s second quarter performance shows it can respond quickly to changes in the economic environment.
“This is, no doubt, in our view a pretty impressive quarter, especially when considering some of the issues that are facing the Canadian economy right now,” he said. “They’ve proven that they can be nimble.”
Second-quarter coal revenue plunged 26 percent from the year-before quarter, but revenue from automotive shipments rose 17 percent, and intermodal revenue was up 2 percent. Overall, carloads fell 3 percent.
Excluding a deferred tax expense, adjusted earnings rose 12 percent to C$1.15 a share. Analysts, on average, had expected earnings of C$1.05 a share on revenue of C$3.17 billion, according to Thomson Reuters I/B/E/S.
The railway’s operating ratio, a key measure of efficiency, improved to 56.4 percent from 59.6 percent a year earlier.
Net income rose to C$886 million ($682 million), or C$1.10 a share, from C$847 million, or C$1.03 a share, a year earlier. Revenue was little changed at C$3.13 billion, compared with C$3.12 billion a year earlier.
Reporting by Allison Martell; Editing by Peter Galloway and Andrew Hay