“After a very, very cold bitter winter, we delivered good results and have a positive outlook to report,” CEO Jean-Jacques Ruest said on the railway’s Monday afternoon earnings call with investors and analysts.
CN’s operating income rose 5% to $1.08 billion as revenue increased 11%, to $3.54 billion. Earnings per share, adjusted for the impact of one-time items, grew 17% to $1.17, which missed analysts estimates by a penny, according to I/B/E/S.
CN’s adjusted operating ratio was 67.2%, a 0.6-point improvement compared to a year ago.
CN’s volume was up 1% on a carload and unit basis, and grew 3% when measured by revenue ton miles, the favorite metric of the Canadian railways.
Petroleum and chemicals volume grew 10% despite a decline in crude oil shipments. Grain and fertilizer shipments were up 3%, as was automotive volume. Coal and intermodal were flat, while metals and minerals carloads sank 3% and forest products volume declined 4%.
Despite the slow growth in the first quarter, CN stuck with its outlook for the full year. The railway expects high single-digit percentage growth in revenue ton miles and earnings per share growth in the low double-digit range.
The confidence in volume growth rests on a variety of factors, including the opening of a new Alberta coal mine that will be exporting via the Port of Prince Rupert, B.C., as well as a new propane export terminal opening at Rupert.
Lumber orders remain solid, CN says, and the railway continues to move record amounts of Canadian grain. Zim Integrated Shipping Services is now calling on Prince Rupert, which will help increase international intermodal volumes, which also are expected to grow due to new refrigerated service and new auto parts import traffic.
Crude oil volume sank during the quarter due to the Alberta government’s order to curtail production and unfavorable oil price changes.
“CN has the capacity to move more crude,” Ruest says.
The railway expects crude volumes to ramp up this summer when new contracts take effect.
CN closed on its acquisition of Canadian trucking company TransX during the quarter, a deal executives say brings new sources of traffic to the railway.
“We’ve actually seen some growth come back to the railroad through TransX,” says Keith Reardon, senior vice president of consumer product supply chain growth.
Ruest was optimistic that the new operator of the container terminal at the Port of Halifax — which has not yet been named — will be able to work with CN to bring more volume to the East Coast port.
CN wants to make Halifax the Prince Rupert of the east by luring today’s big containerships to call at the port. CN would then move the containers to Montreal, Toronto, and Chicago. Prince Rupert is the fastest-growing container port in North America, with most of its traffic bound for the U.S. Midwest.
CN’s safety metrics deteriorated in the quarter. The Federal Railroad Administration train accident rate climbed 29%, while the FRA injury rate rose 3%. Both figures remained within the railway’s five-year average.