Canadian National Railway Company ((TSE:CNR)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The recent earnings call of Canadian National Railway Company (CN) painted a picture of resilience in the face of a challenging 2024. Despite significant disruptions affecting revenue and operational metrics, the sentiment expressed was cautiously optimistic, focusing on strategic initiatives and a positive outlook for 2025. The company demonstrated its ability to bounce back and leverage new opportunities while recovering from past setbacks.
Record Canadian Grain Movement
CN reported a remarkable achievement in the movement of Canadian grain, setting a new record for the quarter. This contributed to a 15% increase in grain revenue ton miles (RTMs) for Q4, highlighting the company’s operational strength in this sector.
Improved Safety Performance
The company marked its second-best performance in terms of accident and injury rates. This improvement underscores CN’s commitment to maintaining high safety standards and operational excellence.
Positive Outlook for 2025
Looking ahead, CN has projected a 10% to 15% growth in earnings per share (EPS) for 2025. The company also reaffirmed its outlook for a high single-digit compound annual growth rate (CAGR) in EPS from 2024 to 2026, signaling confidence in its strategic direction.
Labor Stability Achieved
CN reached tentative agreements with major unions representing its Canadian workforce, establishing a stable labor environment for 2025. This achievement is expected to support operational stability and growth.
Iowa Northern Transaction Approval
The Surface Transportation Board (STB) approved the Iowa Northern transaction, which extends CN’s network reach into the Iowa Green Belt. This strategic expansion is expected to enhance CN’s service capabilities and market presence.
Significant Disruptions in 2024
The year 2024 was marked by several labor and operational disruptions, including strikes at major ports, which adversely affected CN’s performance. These challenges highlight the volatility in the operational environment faced by the company.
Q4 Revenue and EPS Decline
CN experienced a decline in financial performance during Q4, with adjusted EPS decreasing by 10% year-over-year and revenues dropping by 3%. These figures reflect the impact of the disruptions faced during the year.
Operating Ratio Increase
The company’s operating ratio increased by 330 basis points in Q4 to 62.6%, with a full-year increase of 210 basis points to 62.9%. This rise indicates higher operational costs relative to revenue.
Challenges in Regaining Intermodal Share
Following the labor disruptions in 2024, CN struggled to regain its U.S. intermodal market share. This challenge underscores the competitive pressures and operational hurdles faced by the company.
Headwinds in Potash and Forest Products
CN faced headwinds in potash shipments due to strong 2023 comparisons and terminal outages. Additionally, there was continued softness in the demand for forest products, affecting overall performance.
Forward-Looking Guidance
CN has set ambitious goals for 2025, targeting a 10% to 15% growth in EPS and reaffirming its high single-digit EPS CAGR outlook from 2024 to 2026. The company anticipates low to mid-single-digit RTM growth, driven largely by CN-specific initiatives. With a CapEx program of $3.4 billion and a 5% dividend increase, CN aims for margin improvement while preparing for various economic scenarios.
In summary, Canadian National Railway Company remains cautiously optimistic despite the disruptions faced in 2024. The company is focused on leveraging strategic initiatives, improving operational metrics, and achieving growth in 2025. Key takeaways include record achievements in grain movement, improved safety performance, and a positive financial outlook, even as challenges in the market persist.
