CN Railway raises full-year guidance as freight rates jump | So Good News


(Bloomberg) — Canadian National Railway Co . raised its earnings outlook for the year as it reaps the benefits of a strong US dollar and a decision to impose higher fuel surcharges on customers.

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The Montreal-based railroad expects adjusted earnings per share to grow 25% this year from 2021. It previously told investors to expect growth of 15% to 20%. Canadian National beat analysts’ estimates for third-quarter sales and profit. Revenue was C$4.51 billion ($3.3 billion), beating the consensus forecast of C$4.32 billion.

The revenue increase was due to a combination of higher freight rates, fuel surcharges, strong grain and coal volumes and the strength of the dollar, which helped the top line when translated back into Canadian currency.

Canadian National expects to see continued strong demand for grain in Canada and the United States, amid lower water levels on the Mississippi River. Demand for grain, coal and fertilizer is expected to remain robust after Russia’s invasion of Ukraine, company executives said.

“We’re contracting where we need to contract, but there’s a big part of our book that won’t be hit by a recession,” CEO Tracy Robinson said Tuesday on an earnings call.

The country’s largest railway has been under pressure to increase efficiency and has underperformed competitor Canadian Pacific Railway Ltd. In recent years. It had cut its profit outlook in April, saying costs would be much higher because of the rise in fuel prices triggered by Russia’s war in Ukraine.

But now it seems the company has been able to pass on those costs. Canadian National earned C$2.13 per share on an adjusted basis in the quarter, beating forecasts for C$2 per share.

“We have a busy fourth quarter, with a strong start to the Canadian grain crop, and we are resourced for the months ahead. We are pleased to raise our 2022 outlook to reflect our results,” Robinson said in a statement.

(Updates with comments from the company and CEO starting in the fourth paragraph)

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