CN revises outlook upward after strong quarter

CN late Monday, April 23, posted strong first quarter results, prompting the railroad to revise its outlook for the year upward.

Net income for the first quarter of 2012 was C$775 million, or C$1.75 per diluted share, vs. first-quarter 2011 net income of C$668 million, or C$1.45 per diluted share. Excluding the gain on the sale of rail line segments, adjusted diluted earnings per share (EPS) for first-quarter 2012 were C$1.18, an increase of 31% over adjusted diluted EPS of C$0.90 for the same period of 2011.

CN’s first-quarter 2012 results included an after-tax gain of C$252 million, or C$0.57 per diluted share, and the first quarter of 2011 included an after-tax gain of C$254 million, or C$0.55 per diluted share, from the sale of rail line segments in the Toronto area to a public transit agency.

First-quarter 2012 revenues increased 13% to C$2,346 million, while revenue ton-miles rose 6% and carloadings increased 5%. Operating income increased 23% to C$793 million. The operating ratio was 66.2% vs. the year-earlier first-quarter OR of 69.0%.

Claude Mongeau, president and chief executive officer, said CN’s strong first-quarter results and assumption of continued improvement in economic conditions have prompted a positive revision to the company’s 2012 financial outlook, first issued on Jan. 24, 2012. Under its revised 2012 outlook, CN is aiming to deliver a full 10% growth in diluted EPS, on an adjusted basis, over diluted EPS of C$4.84 in 2011 despite significant headwinds from additional pension expense of approximately C$100 million vs. 2011. This compares with CN’s prior 2012 diluted EPS growth forecast of up to 10%, including headwinds from additional pension expense of approximately C$120 million. CN also expects to generate free cash flow of approximately C$950 million, compared with the previous guidance in the order of C$875 million.