January 23, 2018 5:30 PM, EST
Canadian National Reports Mixed Fourth-Quarter Results
Canadian National train in Chicago Eric Pancer/Flickr

Canadian National Railway reported earnings more than doubled in the fourth quarter, although the final figures were bolstered by the Tax Cuts and Jobs Act.

The Class I railroad generated C$2.6 billion in profits for the last three months of 2017, or $3.48 per share. One year ago, the numbers were $1 billion, or $1.32.

However, Canadian National recorded a $1.4 billion tax credit related to anticipated savings when the U.S. government slashed corporate income tax rates to 21%.

Although the name implies otherwise, CN operates as far south as New Orleans and also has a sizable presence in Chicago, Detroit and Memphis, Tenn. And as the company notes in its earnings statements each quarter, a large portion of revenues and expenses is denominated in U.S. dollars.

Excluding the one-time benefit, core business conditions were mixed compared with the end of 2016. Earnings before the income tax benefit declined 13% to $1.2 billion and operating income slipped 6.7% to $1.3 billion. But on a positive note, top-line revenue rose 2.1% to $3.3 billion.

For the full calendar year, Canadian National enjoyed better times than in 2016. Net income jumped 51% to $5.5 billion and earnings before the tax benefit rose 3.3% to $5.1 billion. Revenue climbed 8.3% to $13 billion.

“Our growth continues to outpace the strengthening economy, and I am pleased with the results our dedicated team generated in 2017,” CEO Luc Jobin said in a statement. “Throughout the year we faced rapidly changing market demands and in the fourth quarter dealt with challenging operating conditions, including harsh early winter weather across the network, impacting our performance.”

Canadian National’s intermodal results were mixed in the fourth quarter and full year. Revenue grew 13% to $816 million in the fourth quarter and 12% to $3.2 billion for the full year. But pricing remained tight as revenue per carload dropped 5% to $1,261 in the fourth quarter and 3% to $1,273 for the full year. Intermodal business grew overall due to the surge in volume, jumping 20% to 647,000 carloads in the fourth quarter and 16% to 2.5 million for the entire year.

Metal and mineral revenue grew 20% to $377 million in the quarter and 25% to $1.5 billion for the full year. Petrochemical revenue slipped 5% to $543 million in the quarter but rose 2% to $2.2 billion for the full year.

“The increase in revenues was mainly attributable to higher international container traffic via the ports of Prince Rupert and Vancouver and increased volumes of frac sand, freight rate increases and higher applicable fuel surcharge rates. These factors were partly offset by the negative translation impact of a stronger Canadian dollar, lower export volumes of U.S. soybeans and reduced shipments of crude oil,” the company noted.

Jobin told investors that North American freight volume should continue to grow in 2018. CN forecasts adjusted earnings of $5.25 to $5.40 in 2018 compared with $4.99 in 2017, excluding the tax benefits.

CN will also spend $700 million to acquire 60 new locomotives, fix track and make improvements at intermodal terminals and $400 million on the installation of positive train control in the United States.

Canadian National ranks No. 21 on the Transport Topics Top 50 list of the largest global freight carriers.