CN Announces Second Quarter Results
CN (TSX: CNR) (NYSE: CNI) reported its Q2 2024 financial results, showing revenue growth of 7% to C$4,329 million. However, operating income decreased by 3% to C$1,558 million, while adjusted operating income increased by 2% to C$1,636 million. The company's operating ratio increased by 3.4 points to 64.0%, and diluted EPS decreased by 1% to C$1.75.
CN updated its 2024 guidance, now expecting adjusted diluted EPS growth in the mid to high single-digit range, down from the previous expectation of 10%. The company maintains its capital investment plan of C$3.5 billion and now targets an adjusted ROIC of approximately 15%. CN reiterates its long-term financial outlook, aiming for 10-15% compounded annual diluted EPS growth from 2024-2026.
CN (TSX: CNR) (NYSE: CNI) ha pubblicato i risultati finanziari per il secondo trimestre del 2024, evidenziando una crescita dei ricavi del 7% a C$4.329 milioni. Tuttavia, l'utile operativo è diminuito del 3% a C$1.558 milioni, mentre l'utile operativo rettificato è aumentato del 2% a C$1.636 milioni. Il rapporto operativo dell'azienda è aumentato di 3,4 punti percentuali, raggiungendo il 64,0%, e l'EPS diluito è diminuito dell'1% a C$1,75.
CN ha aggiornato le stime per il 2024, ora prevedendo una crescita dell'EPS diluito rettificato nella fascia medio-alta del singolo numero, in calo rispetto all'aspettativa precedente del 10%. L'azienda mantiene il suo piano di investimenti di capitale di C$3,5 miliardi e ora punta a un ROIC rettificato di circa il 15%. CN ribadisce le sue previsioni finanziarie a lungo termine, puntando a una crescita annuale composta dell'EPS diluito del 10-15% dal 2024 al 2026.
CN (TSX: CNR) (NYSE: CNI) reportó sus resultados financieros del segundo trimestre de 2024, mostrando un crecimiento de ingresos del 7% hasta C$4,329 millones. Sin embargo, el ingreso operativo disminuyó un 3% a C$1,558 millones, mientras que el ingreso operativo ajustado aumentó un 2% a C$1,636 millones. La razón operativa de la compañía aumentó 3.4 puntos, alcanzando el 64.0%, y el EPS diluido disminuyó un 1% a C$1.75.
CN actualizó sus proyecciones para 2024, ahora esperando un crecimiento del EPS diluido ajustado en el rango medio-alto de un solo dígito, por debajo de la expectativa anterior del 10%. La compañía mantiene su plan de inversión de capital de C$3.5 mil millones y ahora tiene como objetivo un ROIC ajustado de aproximadamente el 15%. CN reitera su perspectiva financiera a largo plazo, con el objetivo de un crecimiento del EPS diluido compuesto del 10-15% entre 2024 y 2026.
CN (TSX: CNR) (NYSE: CNI)은 2024년 2분기 재무 실적을 발표하며 수익이 7% 증가하여 C$4,329백만에 달했다고 밝혔습니다. 그러나 영업 소득은 3% 감소한 C$1,558백만에 이르렀고, 조정된 영업 소득은 2% 증가하여 C$1,636백만으로 집계되었습니다. 회사의 영업 비율은 3.4포인트 증가하여 64.0%에 달했고, 희석 주당 순이익(EPS)은 1% 감소하여 C$1.75로 나타났습니다.
CN은 2024년 가이던스를 업데이트하여 조정된 희석 EPS가 단일 자릿수 중간에서 높은 범위로 성장할 것으로 예상하며, 이전의 10% 기대치에서 하향 조정하였습니다. 회사는 C$35억의 자본 투자 계획을 유지하고 있으며, 이제 약 15%의 조정 ROIC 목표를 설정했습니다. CN은 2024년부터 2026년까지 연평균 희석 EPS 성장률을 10-15%로 설정하며 장기 재무 전망을 재확인합니다.
CN (TSX: CNR) (NYSE: CNI) a publié ses résultats financiers pour le deuxième trimestre de 2024, montrant une croissance des revenus de 7% à C$4,329 millions. Cependant, le résultat opérationnel a diminué de 3% pour atteindre C$1,558 millions, tandis que le résultat opérationnel ajusté a augmenté de 2% pour atteindre C$1,636 millions. Le ratio opérationnel de l'entreprise a augmenté de 3,4 points pour atteindre 64,0%, et le BPA dilué a diminué de 1% pour s'établir à C$1,75.
CN a mis à jour ses prévisions pour 2024, s'attendant désormais à une croissance du BPA dilué ajusté dans une fourchette de croissance à un chiffre, moyen à élevé, en baisse par rapport à l'attente précédente de 10%. L'entreprise maintient son plan d'investissement en capital de C$3,5 milliards et vise désormais un ROIC ajusté d'environ 15%. CN réaffirme ses prévisions financières à long terme, visant une croissance annuelle composée du BPA dilué de 10-15% entre 2024 et 2026.
CN (TSX: CNR) (NYSE: CNI) hat die Finanzzahlen für das zweite Quartal 2024 veröffentlicht, die ein Umsatzwachstum von 7% auf C$4.329 Millionen zeigen. Das Betriebsergebnis sank um 3% auf C$1.558 Millionen, während das bereinigte Betriebsergebnis um 2% auf C$1.636 Millionen stieg. Die Betriebsquote des Unternehmens stieg um 3,4 Punkte auf 64,0%, und der verwässerte Gewinn pro Aktie (EPS) fiel um 1% auf C$1,75.
CN hat seine 2024er Prognose aktualisiert und erwartet jetzt ein Wachstum des bereinigten verwässerten EPS im mittleren bis hohen einstelligen Bereich, was eine Herabsetzung der vorherigen Erwartung von 10% darstellt. Das Unternehmen hält an seinem Investitionsplan von C$3,5 Milliarden fest und strebt nun einen bereinigten ROIC von etwa 15% an. CN bekräftigt seinen langfristigen finanziellen Ausblick mit dem Ziel eines jährlichen Wachstums des verwässerten EPS von 10-15% im Zeitraum von 2024 bis 2026.
- Revenue increased by 7% to C$4,329 million
- Adjusted operating income grew by 2% to C$1,636 million
- Adjusted diluted EPS increased by 5%
- Revenue ton miles (RTMs) increased by 7% to 59,936 million
- Operating income decreased by 3% to C$1,558 million
- Operating ratio increased by 3.4 points to 64.0%
- Diluted EPS decreased by 1% to C$1.75
- Adjusted ROIC target lowered to approximately 15% from previous 15-17% range
- 2024 adjusted diluted EPS growth guidance reduced to mid to high single-digit range from previous 10% expectation
Insights
CN’s second quarter results highlight several key financial metrics, offering valuable insights for investors. The 7% increase in revenue ton miles (RTMs) and the 7% rise in revenues are positive indicators of volume growth and demand. However, it's worth noting the 3% decrease in operating income and the 1% decrease in diluted EPS, which suggest increased operational costs might be impacting profitability. The company's adjusted performance metrics, including a 2% increase in adjusted operating income and a 5% rise in adjusted EPS, paint a more optimistic picture, indicating effective cost management when unusual items are excluded. CN’s revised guidance to mid to high single-digit EPS growth, down from approximately 10%, reflects a cautious outlook likely due to labor uncertainties. These financial nuances offer a mixed but cautiously optimistic outlook for CN’s financial health, emphasizing both growth and areas of concern.
From a market perspective, CN’s quarterly performance reveals significant aspects. The increase in RTMs and revenue boost demonstrate robust demand and successful market strategies. However, the rise in the operating ratio to 64.0% is a cautionary signal, indicating rising operational inefficiencies or higher costs. Investors should pay attention to the adjusted operating ratio of 62.2%, which still shows an increase, albeit smaller. CN’s commitment to a
When analyzing the impact of CN’s results from a technological standpoint, the emphasis on scheduled railroading is significant. This operational philosophy focuses on optimizing asset utilization and service reliability, which could be key in managing increasing volumes efficiently. The increased revenues alongside challenges in operational costs suggest there might be opportunities for further technological innovations, such as AI-driven logistics or enhanced predictive maintenance, to improve efficiency. CN’s ongoing investments, particularly in their capital program, will likely include significant technological upgrades aimed at boosting long-term operational performance and reliability, critical for sustaining growth in an industry highly dependent on logistical efficiency.
Company Remains Focused on Growth and Disciplined Adherence to Scheduled Railroading
MONTREAL, July 23, 2024 (GLOBE NEWSWIRE) -- CN (TSX: CNR) (NYSE: CNI) today reported its financial and operating results for the second quarter ended June 30, 2024.
“I am encouraged by our quarterly volume gains, particularly our CN specific growth initiatives. Our team of railroaders has continued to deliver outstanding service to our customers despite some transient challenges on a key portion of our Western Region that impacted our costs, and traffic diversions due to ongoing labor uncertainty. As we look forward, we are focused on the disciplined execution of our plan, delivering sustainable growth, and resolving labor uncertainty.”
- Tracy Robinson, President and Chief Executive Officer, CN
Quarterly highlights
- Revenue ton miles (RTMs) of 59,936 (millions), an increase of
7% . - Revenues of C
$4,329 million , an increase of C$272 million , or7% . - Operating income of C
$1,558 million , a decrease of C$42 million or3% and adjusted operating income of C$1,636 million , an increase of C$36 million or2% . (1) - Operating ratio, defined as operating expenses as a percentage of revenues, of
64.0% , an increase of 3.4-points and adjusted operating ratio of62.2% , an increase of 1.6-points. (1) - Diluted earnings per share (EPS) of C
$1.75 , a decrease of1% and adjusted diluted earnings per share of C$1.84 , an increase of5% . (1)
Updated 2024 guidance and reiterated long-term financial outlook (1) (2)
Accounting for second quarter results and the ongoing volume impact of the current labor uncertainty, CN now expects to deliver adjusted diluted EPS growth in the mid to high single-digit range (compared to its April 23, 2024 expectation of approximately
CN reiterates its longer-term financial perspective and continues to target compounded annual diluted EPS growth in the range of
CONFERENCE CALL DETAILS
CN's senior officers will review the results and the railway's outlook in a conference call starting at 4:30 p.m. Eastern Time on July 23. Tracy Robinson, CN President and Chief Executive Officer, will lead the call. Parties wishing to participate via telephone may dial 1-800-715-9871 (Canada/U.S.), or 1-647-932-3411 (International), using 2135176 as the passcode. Participants are advised to dial in 10 minutes prior to the call.
(1) Non-GAAP Measures
CN reports its financial results in accordance with United States generally accepted accounting principles (GAAP). CN uses non-GAAP measures in this news release that do not have any standardized meaning prescribed by GAAP, including adjusted earnings per share (EPS), adjusted operating income and adjusted operating ratio (referred to as adjusted performance measures). These non-GAAP measures may not be comparable to similar measures presented by other companies. For further details of these non-GAAP measures, including a reconciliation to the most directly comparable GAAP financial measures, refer to the attached supplementary schedule, Non-GAAP Measures.
CN's full-year adjusted diluted EPS outlook and full-year adjusted ROIC outlook (2) exclude certain adjustments, which are expected to be comparable to adjustments made in prior years. However, management cannot individually quantify on a forward-looking basis the impact of these adjustments on its adjusted diluted EPS or its adjusted ROIC because these items, which could be significant, are difficult to predict and may be highly variable. As a result, CN does not provide a corresponding GAAP measure for, or reconciliation to, its adjusted diluted EPS outlook or its adjusted ROIC outlook.
(2) Forward-Looking Statements
Certain statements included in this news release constitute "forward-looking statements" within the meaning of the United States Private Securities Litigation Reform Act of 1995 and under Canadian securities laws, including statements based on management’s assessment and assumptions and publicly available information with respect to CN. By their nature, forward-looking statements involve risks, uncertainties and assumptions. CN cautions that its assumptions may not materialize and that current economic conditions render such assumptions, although reasonable at the time they were made, subject to greater uncertainty. Forward-looking statements may be identified by the use of terminology such as "believes," "expects," "anticipates," "assumes," "outlook," "plans," "targets", or other similar words.
2024 key assumptions
CN has made a number of economic and market assumptions in preparing its 2024 outlook. The Company continues to assume slightly positive North American industrial production in 2024. For the 2023/2024 crop year, the grain crop in Canada was below its three-year average (also below when excluding the significantly lower 2021/2022 crop year) and the U.S. grain crop was above its three-year average. The Company continues to assume that the 2024/2025 grain crop in Canada will be in line with its three-year average (excluding the significantly lower 2021/2022 crop year) and now assumes that the U.S. grain crop will be above its three-year average (compared to its April 23, 2024 assumption that the 2024/2025 grain crop in the U.S. will be in line with its three-year average). CN now assumes RTM growth will be in the range of
2024-2026 key assumptions
CN has made a number of economic and market assumptions in preparing its three-year financial perspective. CN assumes that the North American industrial production will increase by at least two percent CAGR over the 2024 to 2026 period. CN assumes continued pricing above rail inflation. CN assumes that the value of the Canadian dollar in U.S. currency will be approximately
Forward-looking statements are not guarantees of future performance and involve risks, uncertainties and other factors which may cause actual results, performance or achievements of CN to be materially different from the outlook or any future results, performance or achievements implied by such statements. Accordingly, readers are advised not to place undue reliance on forward-looking statements. Important risk factors that could affect the forward-looking statements in this news release include, but are not limited to, general economic and business conditions, including factors impacting global supply chains such as pandemics and geopolitical conflicts and tensions; industry competition; inflation, currency and interest rate fluctuations; changes in fuel prices; legislative and/or regulatory developments; compliance with environmental laws and regulations; actions by regulators; increases in maintenance and operating costs; security threats; reliance on technology and related cybersecurity risk; trade restrictions or other changes to international trade arrangements; transportation of hazardous materials; various events which could disrupt operations, including illegal blockades of rail networks, and natural events such as severe weather, droughts, fires, floods and earthquakes; climate change; labor negotiations and disruptions; environmental claims; uncertainties of investigations, proceedings and other types of claims and litigation; risks and liabilities arising from derailments; timing and completion of capital programs; the availability of and cost competitiveness of renewable fuels and the development of new locomotive propulsion technology; reputational risks; supplier concentration; pension funding requirements and volatility; and other risks detailed from time to time in reports filed by CN with securities regulators in Canada and the United States. Reference should also be made to Management’s Discussion and Analysis (MD&A) in CN’s annual and interim reports, Annual Information Form and Form 40-F, filed with Canadian and U.S. securities regulators and available on CN’s website, for a description of major risk factors relating to CN.
Forward-looking statements reflect information as of the date on which they are made. CN assumes no obligation to update or revise forward-looking statements to reflect future events, changes in circumstances, or changes in beliefs, unless required by applicable securities laws. In the event CN does update any forward-looking statement, no inference should be made that CN will make additional updates with respect to that statement, related matters, or any other forward-looking statement. Information contained on, or accessible through, our website is not incorporated by reference into this news release.
This earnings news release, as well as additional information, including the Financial Statements, Notes thereto and MD&A, is contained in CN’s Quarterly Review available on the Company's website at www.cn.ca/financial-results and on SEDAR+ at www.sedarplus.ca as well as on the U.S. Securities and Exchange Commission's website at www.sec.gov through EDGAR.
About CN
CN powers the economy by safely transporting more than 300 million tons of natural resources, manufactured products, and finished goods throughout North America every year for its customers. With its nearly 20,000-mile rail network and related transportation services, CN connects Canada’s Eastern and Western coasts with the U.S. Midwest and the Gulf of Mexico, contributing to sustainable trade and the prosperity of the communities in which it operates since 1919.
| Contacts: | |
| Media | Investment Community |
| Jonathan Abecassis | Stacy Alderson |
| Director | Assistant Vice-President |
| Public Affairs and Media Relations | Investor Relations |
| (438) 455-3692 | (514) 399-0052 |
| media@cn.ca | investor.relations@cn.ca |
SELECTED RAILROAD STATISTICS – UNAUDITED
| Three months ended June 30 | Six months ended June 30 | |||||||
| 2024 | 2023 | 2024 | 2023 | |||||
| Financial measures | ||||||||
| Key financial performance indicators (1) | ||||||||
| Total revenues ($ millions) | 4,329 | 4,057 | 8,578 | 8,370 | ||||
| Freight revenues ($ millions) | 4,153 | 3,894 | 8,290 | 8,113 | ||||
| Operating income ($ millions) | 1,558 | 1,600 | 3,104 | 3,262 | ||||
| Adjusted operating income ($ millions) (2)(3) | 1,636 | 1,600 | 3,182 | 3,262 | ||||
| Net income ($ millions) | 1,114 | 1,167 | 2,217 | 2,387 | ||||
| Adjusted net income ($ millions) (2)(3) | 1,172 | 1,167 | 2,275 | 2,387 | ||||
| Diluted earnings per share ($) | 1.75 | 1.76 | 3.47 | 3.58 | ||||
| Adjusted diluted earnings per share ($) (2)(3) | 1.84 | 1.76 | 3.56 | 3.58 | ||||
| Free cash flow ($ millions) (2)(4) | 947 | 1,100 | 1,476 | 1,693 | ||||
| Gross property additions ($ millions) | 853 | 875 | 1,429 | 1,336 | ||||
| Share repurchases ($ millions) | 1,116 | 1,043 | 2,071 | 2,242 | ||||
| Dividends per share ($) | 0.8450 | 0.7900 | 1.6900 | 1.5800 | ||||
| Financial ratio | ||||||||
| Operating ratio (%) (5) | 64.0 | 60.6 | 63.8 | 61.0 | ||||
| Adjusted operating ratio (%) (2)(3) | 62.2 | 60.6 | 62.9 | 61.0 | ||||
| Operational measures (6) | ||||||||
| Statistical operating data | ||||||||
| Gross ton miles (GTMs) (millions) | 117,852 | 109,693 | 233,479 | 225,135 | ||||
| Revenue ton miles (RTMs) (millions) | 59,936 | 55,877 | 119,685 | 115,838 | ||||
| Carloads (thousands) | 1,419 | 1,369 | 2,762 | 2,722 | ||||
| Route miles (includes Canada and the U.S.) | 18,800 | 18,600 | 18,800 | 18,600 | ||||
| Employees (end of period) | 25,656 | 25,178 | 25,656 | 25,178 | ||||
| Employees (average for the period) | 25,570 | 25,005 | 25,381 | 24,704 | ||||
| Key operating measures | ||||||||
| Freight revenue per RTM (cents) | 6.93 | 6.97 | 6.93 | 7.00 | ||||
| Freight revenue per carload ($) | 2,927 | 2,844 | 3,001 | 2,981 | ||||
| GTMs per average number of employees (thousands) | 4,609 | 4,387 | 9,199 | 9,113 | ||||
| Operating expenses per GTM (cents) | 2.35 | 2.24 | 2.34 | 2.27 | ||||
| Labor and fringe benefits expense per GTM (cents) | 0.72 | 0.68 | 0.75 | 0.69 | ||||
| Diesel fuel consumed (US gallons in millions) | 103.0 | 97.4 | 206.6 | 201.5 | ||||
| Average fuel price ($ per US gallon) | 4.57 | 4.24 | 4.54 | 4.52 | ||||
| Fuel efficiency (US gallons of locomotive fuel consumed per 1,000 GTMs) | 0.874 | 0.888 | 0.885 | 0.895 | ||||
| Train weight (tons) | 9,097 | 9,062 | 9,092 | 9,099 | ||||
| Train length (feet) | 8,015 | 7,934 | 7,902 | 7,843 | ||||
| Car velocity (car miles per day) | 210 | 216 | 208 | 213 | ||||
| Through dwell (entire railroad, hours) | 6.9 | 6.8 | 7.0 | 6.9 | ||||
| Through network train speed (miles per hour) | 18.3 | 19.9 | 18.5 | 20.0 | ||||
| Locomotive utilization (trailing GTMs per total horsepower) | 188 | 189 | 188 | 192 | ||||
| Safety indicators (7) | ||||||||
| Injury frequency rate (per 200,000 person hours) | 1.17 | 1.04 | 1.16 | 1.01 | ||||
| Accident rate (per million train miles) | 1.54 | 1.98 | 1.61 | 1.75 | ||||
| (1) | Amounts expressed in Canadian dollars and prepared in accordance with United States generally accepted accounting principles (GAAP), unless otherwise noted. |
| (2) | These non-GAAP measures do not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies. |
| (3) | See the supplementary schedule entitled Non-GAAP Measures – Adjusted performance measures for an explanation of these non-GAAP measures. |
| (4) | See the supplementary schedule entitled Non-GAAP Measures – Free cash flow for an explanation of this non-GAAP measure. |
| (5) | Operating ratio is defined as operating expenses as a percentage of revenues. |
| (6) | Statistical operating data, key operating measures and safety indicators are unaudited and based on estimated data available at such time and are subject to change as more complete information becomes available. Definitions of gross ton miles, revenue ton miles, freight revenue per RTM, fuel efficiency, train weight, train length, car velocity, through dwell and through network train speed are included within the Company’s Management’s Discussion and Analysis. Definitions of all other indicators are provided on CN's website, www.cn.ca/glossary. |
| (7) | Based on Federal Railroad Administration (FRA) reporting criteria. |
SUPPLEMENTARY INFORMATION – UNAUDITED
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||
| 2024 | 2023 | % Change Fav (Unfav) | % Change at constant currency (1) Fav (Unfav) | 2024 | 2023 | % Change Fav (Unfav) | % Change at constant currency (1) Fav (Unfav) | |||||||||
| Revenues ($ millions) (2) | ||||||||||||||||
| Petroleum and chemicals | 850 | 748 | 14 | % | 12 | % | 1,707 | 1,576 | 8 | % | 8 | % | ||||
| Metals and minerals | 528 | 497 | 6 | % | 5 | % | 1,058 | 1,026 | 3 | % | 3 | % | ||||
| Forest products | 501 | 480 | 4 | % | 3 | % | 995 | 991 | — | % | — | % | ||||
| Coal | 241 | 263 | (8 | %) | (9 | %) | 462 | 526 | (12 | %) | (12 | %) | ||||
| Grain and fertilizers | 738 | 688 | 7 | % | 7 | % | 1,598 | 1,549 | 3 | % | 3 | % | ||||
| Intermodal | 1,040 | 983 | 6 | % | 5 | % | 1,999 | 1,995 | — | % | — | % | ||||
| Automotive | 255 | 235 | 9 | % | 7 | % | 471 | 450 | 5 | % | 4 | % | ||||
| Total freight revenues | 4,153 | 3,894 | 7 | % | 6 | % | 8,290 | 8,113 | 2 | % | 2 | % | ||||
| Other revenues | 176 | 163 | 8 | % | 7 | % | 288 | 257 | 12 | % | 11 | % | ||||
| Total revenues | 4,329 | 4,057 | 7 | % | 6 | % | 8,578 | 8,370 | 2 | % | 2 | % | ||||
| Revenue ton miles (RTMs) (millions) (3) | ||||||||||||||||
| Petroleum and chemicals | 11,651 | 10,426 | 12 | % | 12 | % | 23,365 | 21,445 | 9 | % | 9 | % | ||||
| Metals and minerals | 7,558 | 6,740 | 12 | % | 12 | % | 14,908 | 13,828 | 8 | % | 8 | % | ||||
| Forest products | 5,751 | 5,754 | — | % | — | % | 11,520 | 11,810 | (2 | %) | (2 | %) | ||||
| Coal | 5,293 | 5,965 | (11 | %) | (11 | %) | 9,931 | 11,813 | (16 | %) | (16 | %) | ||||
| Grain and fertilizers | 14,586 | 13,592 | 7 | % | 7 | % | 31,618 | 30,610 | 3 | % | 3 | % | ||||
| Intermodal | 14,214 | 12,611 | 13 | % | 13 | % | 26,745 | 24,870 | 8 | % | 8 | % | ||||
| Automotive | 883 | 789 | 12 | % | 12 | % | 1,598 | 1,462 | 9 | % | 9 | % | ||||
| Total RTMs | 59,936 | 55,877 | 7 | % | 7 | % | 119,685 | 115,838 | 3 | % | 3 | % | ||||
| Freight revenue / RTM (cents) (2)(3) | ||||||||||||||||
| Petroleum and chemicals | 7.30 | 7.17 | 2 | % | 1 | % | 7.31 | 7.35 | (1 | %) | (1 | %) | ||||
| Metals and minerals | 6.99 | 7.37 | (5 | %) | (7 | %) | 7.10 | 7.42 | (4 | %) | (5 | %) | ||||
| Forest products | 8.71 | 8.34 | 4 | % | 3 | % | 8.64 | 8.39 | 3 | % | 2 | % | ||||
| Coal | 4.55 | 4.41 | 3 | % | 3 | % | 4.65 | 4.45 | 4 | % | 4 | % | ||||
| Grain and fertilizers | 5.06 | 5.06 | — | % | (1 | %) | 5.05 | 5.06 | — | % | — | % | ||||
| Intermodal | 7.32 | 7.79 | (6 | %) | (7 | %) | 7.47 | 8.02 | (7 | %) | (7 | %) | ||||
| Automotive | 28.88 | 29.78 | (3 | %) | (5 | %) | 29.47 | 30.78 | (4 | %) | (5 | %) | ||||
| Total freight revenue / RTM | 6.93 | 6.97 | (1 | %) | (1 | %) | 6.93 | 7.00 | (1 | %) | (1 | %) | ||||
| Carloads (thousands) (3) | ||||||||||||||||
| Petroleum and chemicals | 162 | 151 | 7 | % | 7 | % | 327 | 312 | 5 | % | 5 | % | ||||
| Metals and minerals | 247 | 248 | — | % | — | % | 487 | 485 | — | % | — | % | ||||
| Forest products | 77 | 77 | — | % | — | % | 155 | 158 | (2 | %) | (2 | %) | ||||
| Coal | 115 | 132 | (13 | %) | (13 | %) | 227 | 262 | (13 | %) | (13 | %) | ||||
| Grain and fertilizers | 162 | 152 | 7 | % | 7 | % | 333 | 330 | 1 | % | 1 | % | ||||
| Intermodal | 597 | 550 | 9 | % | 9 | % | 1,124 | 1,062 | 6 | % | 6 | % | ||||
| Automotive | 59 | 59 | — | % | — | % | 109 | 113 | (4 | %) | (4 | %) | ||||
| Total carloads | 1,419 | 1,369 | 4 | % | 4 | % | 2,762 | 2,722 | 1 | % | 1 | % | ||||
| Freight revenue / carload ($) (2)(3) | ||||||||||||||||
| Petroleum and chemicals | 5,247 | 4,954 | 6 | % | 5 | % | 5,220 | 5,051 | 3 | % | 3 | % | ||||
| Metals and minerals | 2,138 | 2,004 | 7 | % | 5 | % | 2,172 | 2,115 | 3 | % | 2 | % | ||||
| Forest products | 6,506 | 6,234 | 4 | % | 3 | % | 6,419 | 6,272 | 2 | % | 2 | % | ||||
| Coal | 2,096 | 1,992 | 5 | % | 5 | % | 2,035 | 2,008 | 1 | % | 1 | % | ||||
| Grain and fertilizers | 4,556 | 4,526 | 1 | % | — | % | 4,799 | 4,694 | 2 | % | 2 | % | ||||
| Intermodal | 1,742 | 1,787 | (3 | %) | (3 | %) | 1,778 | 1,879 | (5 | %) | (6 | %) | ||||
| Automotive | 4,322 | 3,983 | 9 | % | 7 | % | 4,321 | 3,982 | 9 | % | 8 | % | ||||
| Total freight revenue / carload | 2,927 | 2,844 | 3 | % | 2 | % | 3,001 | 2,981 | 1 | % | — | % | ||||
| (1) | This non-GAAP measure does not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies. See the supplementary schedule entitled Non-GAAP Measures – Constant currency for an explanation of this non-GAAP measure. |
| (2) | Amounts expressed in Canadian dollars. |
| (3) | Statistical operating data and related key operating measures are unaudited and based on estimated data available at such time and are subject to change as more complete information becomes available. |
NON-GAAP MEASURES – UNAUDITED
In this supplementary schedule, the "Company" or "CN" refers to Canadian National Railway Company, together with its wholly-owned subsidiaries. Financial information included in this schedule is expressed in Canadian dollars, unless otherwise noted.
CN reports its financial results in accordance with United States generally accepted accounting principles (GAAP). The Company also uses non-GAAP measures that do not have any standardized meaning prescribed by GAAP, including adjusted performance measures, free cash flow, constant currency and adjusted debt-to-adjusted EBITDA multiple. These non-GAAP measures may not be comparable to similar measures presented by other companies. From management's perspective, these non-GAAP measures are useful measures of performance and provide investors with supplementary information to assess the Company's results of operations and liquidity. These non-GAAP measures should not be considered in isolation or as a substitute for financial measures prepared in accordance with GAAP.
Adjusted performance measures
Adjusted net income, adjusted diluted earnings per share, adjusted operating income, adjusted operating expenses and adjusted operating ratio are non-GAAP measures that are used to set performance goals and to measure CN's performance. Management believes that these adjusted performance measures provide additional insight to management and investors into the Company's operations and underlying business trends as well as facilitate period-to-period comparisons, as they exclude certain significant items that are not reflective of CN's underlying business operations and could distort the analysis of trends in business performance. These items may include:
- operating expense adjustments: workforce reduction program, depreciation expense on the deployment of replacement system, advisory fees related to shareholder matters, losses and recoveries from assets held for sale, business acquisition-related costs;
- non-operating expense adjustments: business acquisition-related financing fees, merger termination income, gains and losses on disposal of property; and
- the effect of changes in tax laws including rate enactments, and changes in tax positions affecting prior years.
These non-GAAP measures do not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies.
For the three and six months ended June 30, 2024, the Company's adjusted net income was
For the three and six months ended June 30, 2023, the Company's net income was
Adjusted net income is defined as Net income in accordance with GAAP adjusted for certain significant items. Adjusted diluted earnings per share is defined as adjusted net income divided by the weighted-average diluted shares outstanding. The following table provides a reconciliation of Net income and Earnings per share in accordance with GAAP, as reported for the three and six months ended June 30, 2024 and 2023, to the non-GAAP adjusted performance measures presented herein:
| Three months ended June 30 | Six months ended June 30 | |||||||||||
| In millions, except per share data | 2024 | 2023 | 2024 | 2023 | ||||||||
| Net income | $ | 1,114 | $ | 1,167 | $ | 2,217 | $ | 2,387 | ||||
| Adjustments: | ||||||||||||
| Loss on assets held for sale | 78 | — | 78 | — | ||||||||
| Tax effect of adjustments (1) | (20 | ) | — | (20 | ) | — | ||||||
| Total adjustments | 58 | — | 58 | — | ||||||||
| Adjusted net income | $ | 1,172 | $ | 1,167 | $ | 2,275 | $ | 2,387 | ||||
| Diluted earnings per share | $ | 1.75 | $ | 1.76 | $ | 3.47 | $ | 3.58 | ||||
| Impact of adjustments, per share | 0.09 | — | 0.09 | — | ||||||||
| Adjusted diluted earnings per share | $ | 1.84 | $ | 1.76 | $ | 3.56 | $ | 3.58 | ||||
| (1) | The tax impact of adjustments is based on the nature of the item for tax purposes and related tax rates in the applicable jurisdiction. |
Adjusted operating income is defined as Operating income in accordance with GAAP adjusted for certain significant operating expense items that are not reflective of CN's underlying business operations. Adjusted operating expenses is defined as Operating expenses in accordance with GAAP adjusted for certain significant operating expense items that are not reflective of CN's underlying business operations. Adjusted operating ratio is defined as adjusted operating expenses as a percentage of revenues. The following table provides a reconciliation of Operating income, Operating expenses and operating ratio, as reported for the three and six months ended June 30, 2024 and 2023, to the non-GAAP adjusted performance measures presented herein:
| Three months ended June 30 | Six months ended June 30 | |||||||||||
| In millions, except percentages | 2024 | 2023 | 2024 | 2023 | ||||||||
| Operating income | $ | 1,558 | $ | 1,600 | $ | 3,104 | $ | 3,262 | ||||
| Adjustment: | ||||||||||||
| Loss on assets held for sale | 78 | — | 78 | — | ||||||||
| Total adjustment | 78 | — | 78 | — | ||||||||
| Adjusted operating income | $ | 1,636 | $ | 1,600 | $ | 3,182 | $ | 3,262 | ||||
| Operating expenses | $ | 2,771 | $ | 2,457 | $ | 5,474 | $ | 5,108 | ||||
| Total adjustment | (78 | ) | — | (78 | ) | — | ||||||
| Adjusted operating expenses | $ | 2,693 | $ | 2,457 | $ | 5,396 | $ | 5,108 | ||||
| Operating ratio | 64.0 | % | 60.6 | % | 63.8 | % | 61.0 | % | ||||
| Impact of adjustment | (1.8 | )% | — | % | (0.9 | )% | — | % | ||||
| Adjusted operating ratio | 62.2 | % | 60.6 | % | 62.9 | % | 61.0 | % | ||||
Free cash flow
Free cash flow is a useful measure of liquidity as it demonstrates the Company's ability to generate cash for debt obligations and for discretionary uses such as payment of dividends, share repurchases, and strategic opportunities. The Company defines its free cash flow measure as the difference between net cash provided by operating activities and net cash used in investing activities, adjusted for the impact of (i) business acquisitions and (ii) merger transaction-related payments, cash receipts and cash income taxes, which are items that are not indicative of operating trends. Free cash flow does not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies.
The following table provides a reconciliation of Net cash provided by operating activities in accordance with GAAP, as reported for the three and six months ended June 30, 2024 and 2023, to the non-GAAP free cash flow presented herein:
| Three months ended June 30 | Six months ended June 30 | |||||||||||
| In millions | 2024 | 2023 | 2024 | 2023 | ||||||||
| Net cash provided by operating activities | $ | 1,813 | $ | 1,985 | $ | 2,930 | $ | 3,040 | ||||
| Net cash used in investing activities | (866 | ) | (885 | ) | (1,454 | ) | (1,347 | ) | ||||
| Free cash flow | $ | 947 | $ | 1,100 | $ | 1,476 | $ | 1,693 | ||||
Constant currency
Financial results at constant currency allow results to be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons in the analysis of trends in business performance. Measures at constant currency are considered non-GAAP measures and do not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies. Financial results at constant currency are obtained by translating the current period results denominated in US dollars at the weighted average foreign exchange rates used to translate transactions denominated in US dollars of the comparable period of the prior year.
The average foreign exchange rates were
The following table provides a reconciliation of the impact of constant currency and related percentage change at constant currency on the financial results, as reported for the three and six months ended June 30, 2024:
| Three months ended June 30 | Six months ended June 30 | |||||||||||||||||||||
| In millions, except per share data | 2024 | Constant currency impact | 2023 | % Change at constant currency Fav (Unfav) | 2024 | Constant currency impact | 2023 | % Change at constant currency Fav (Unfav) | ||||||||||||||
| Revenues | ||||||||||||||||||||||
| Petroleum and chemicals | $ | 850 | $ | (9 | ) | $ | 748 | 12 | % | $ | 1,707 | $ | (7 | ) | $ | 1,576 | 8 | % | ||||
| Metals and minerals | 528 | (8 | ) | 497 | 5 | % | 1,058 | (6 | ) | 1,026 | 3 | % | ||||||||||
| Forest products | 501 | (6 | ) | 480 | 3 | % | 995 | (5 | ) | 991 | — | % | ||||||||||
| Coal | 241 | (1 | ) | 263 | (9 | %) | 462 | (1 | ) | 526 | (12 | %) | ||||||||||
| Grain and fertilizers | 738 | (5 | ) | 688 | 7 | % | 1,598 | (4 | ) | 1,549 | 3 | % | ||||||||||
| Intermodal | 1,040 | (5 | ) | 983 | 5 | % | 1,999 | (4 | ) | 1,995 | — | % | ||||||||||
| Automotive | 255 | (4 | ) | 235 | 7 | % | 471 | (3 | ) | 450 | 4 | % | ||||||||||
| Total freight revenues | 4,153 | (38 | ) | 3,894 | 6 | % | 8,290 | (30 | ) | 8,113 | 2 | % | ||||||||||
| Other revenues | 176 | (2 | ) | 163 | 7 | % | 288 | (2 | ) | 257 | 11 | % | ||||||||||
| Total revenues | 4,329 | (40 | ) | 4,057 | 6 | % | 8,578 | (32 | ) | 8,370 | 2 | % | ||||||||||
| Operating expenses | ||||||||||||||||||||||
| Labor and fringe benefits | 850 | (6 | ) | 747 | (13 | %) | 1,744 | (4 | ) | 1,559 | (12 | %) | ||||||||||
| Purchased services and material | 578 | (5 | ) | 571 | — | % | 1,149 | (5 | ) | 1,164 | 2 | % | ||||||||||
| Fuel | 546 | (8 | ) | 485 | (11 | %) | 1,060 | (7 | ) | 1,042 | (1 | %) | ||||||||||
| Depreciation and amortization | 466 | (4 | ) | 449 | (3 | %) | 928 | (3 | ) | 897 | (3 | %) | ||||||||||
| Equipment rents | 102 | (2 | ) | 83 | (20 | %) | 201 | (2 | ) | 173 | (15 | %) | ||||||||||
| Other | 151 | (2 | ) | 122 | (22 | %) | 314 | (2 | ) | 273 | (14 | %) | ||||||||||
| Loss on assets held for sale | 78 | — | — | — | % | 78 | — | — | — | % | ||||||||||||
| Total operating expenses | 2,771 | (27 | ) | 2,457 | (12 | %) | 5,474 | (23 | ) | 5,108 | (7 | %) | ||||||||||
| Operating income | 1,558 | (13 | ) | 1,600 | (3 | %) | 3,104 | (9 | ) | 3,262 | (5 | %) | ||||||||||
| Interest expense | (220 | ) | 2 | (173 | ) | (26 | %) | (430 | ) | 2 | (338 | ) | (27 | %) | ||||||||
| Other components of net periodic benefit income | 114 | — | 120 | (5 | %) | 227 | — | 239 | (5 | %) | ||||||||||||
| Other income | 32 | — | 1 | 3100 | % | 34 | — | 2 | 1600 | % | ||||||||||||
| Income before income taxes | 1,484 | (11 | ) | 1,548 | (5 | %) | 2,935 | (7 | ) | 3,165 | (7 | %) | ||||||||||
| Income tax expense | (370 | ) | 3 | (381 | ) | 4 | % | (718 | ) | 2 | (778 | ) | 8 | % | ||||||||
| Net income | $ | 1,114 | $ | (8 | ) | $ | 1,167 | (5 | %) | $ | 2,217 | $ | (5 | ) | $ | 2,387 | (7 | %) | ||||
| Diluted earnings per share | $ | 1.75 | $ | (0.01 | ) | $ | 1.76 | (1 | %) | $ | 3.47 | $ | (0.01 | ) | $ | 3.58 | (3 | %) | ||||
Adjusted debt-to-adjusted EBITDA multiple
Management believes that the adjusted debt-to-adjusted EBITDA multiple is a useful credit measure because it reflects the Company's ability to service its debt and other long-term obligations. The Company calculates the adjusted debt-to-adjusted EBITDA multiple as adjusted debt divided by the last twelve months of adjusted EBITDA. Adjusted debt is defined as the sum of Long-term debt and Current portion of long-term debt as reported on the Company’s Consolidated Balance Sheets as well as Operating lease liabilities, including current portion and pension plans in deficiency recognized on the Company's Consolidated Balance Sheets due to the debt-like nature of their contractual and financial obligations. Adjusted EBITDA is calculated as Net income excluding Interest expense, Income tax expense, Depreciation and amortization, operating lease cost, Other components of net periodic benefit income, Other income (loss), and other significant items that are not reflective of CN's underlying business operations and which could distort the analysis of trends in business performance. Adjusted debt and adjusted EBITDA are non-GAAP measures used to compute the adjusted debt-to-adjusted EBITDA multiple. These measures do not have any standardized meaning prescribed by GAAP and therefore, may not be comparable to similar measures presented by other companies.
The following table provides a reconciliation of debt and Net income in accordance with GAAP, reported as at and for the twelve months ended June 30, 2024 and 2023, to the adjusted measures presented herein, which have been used to calculate the non-GAAP adjusted debt-to-adjusted EBITDA multiple:
| In millions, unless otherwise indicated | As at and for the twelve months ended June 30, | 2024 | 2023 | ||||
| Debt | $ | 20,510 | $ | 16,938 | |||
| Adjustments: | |||||||
| Operating lease liabilities, including current portion (1) | 373 | 410 | |||||
| Pension plans in deficiency (2) | 359 | 350 | |||||
| Adjusted debt | $ | 21,242 | $ | 17,698 | |||
| Net income | $ | 5,455 | $ | 5,262 | |||
| Interest expense | 814 | 632 | |||||
| Income tax expense | 803 | 1,699 | |||||
| Depreciation and amortization | 1,848 | 1,783 | |||||
| Operating lease cost (3) | 151 | 147 | |||||
| Other components of net periodic benefit income | (467 | ) | (488 | ) | |||
| Other loss (income) | (166 | ) | 1 | ||||
| Adjustment: | |||||||
| Loss on assets held for sale (4) | 78 | — | |||||
| Adjusted EBITDA | $ | 8,516 | $ | 9,036 | |||
| Adjusted debt-to-adjusted EBITDA multiple (times) | 2.49 | 1.96 | |||||
| (1) | Represents the present value of operating lease payments. |
| (2) | Represents the total funded deficit of all defined benefit pension plans with a projected benefit obligation in excess of plan assets. |
| (3) | Represents the operating lease costs recorded in Purchased services and material and Equipment rents within the Consolidated Statements of Income. |
| (4) | Relates to a loss of |
FAQ
What was CN's revenue for Q2 2024?
How did CN's operating income change in Q2 2024?
What is CN's updated guidance for adjusted diluted EPS growth in 2024?
What is CN's long-term financial outlook for 2024-2026?
