July 27, 2022 10:17 AM, EDT

Canadian National Reports Strong Q2 Earnings

New CEO Tracy Robinson at Helm
Canadian National trainCanadian National Railway

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Canadian National reported record second-quarter earnings that beat the expectations of Wall Street analysts.

The Montreal-based Class I railroad on July 26 said quarterly net income was C$1.32 billion or C$1.92 a share, compared with C$1.03 billion, C$1.46, a year ago. Revenue rose 21% to C$4.34 billion compared with C$3.59 billion in the same period a year ago, a gain of C$746 million.

The Q2 per-share result easily beat analyst forecasts of C$1.76 per share.

Tracy Robinson


The railroad’s Q2 operating ratio improved to 59.3 from 61.6 a year ago. Operating ratio measures a company’s expenses as a percentage of revenue and determines efficiency. The lower the ratio, the more ability the company has to make a profit. The company has set a goal of keeping operating ratio for the year below 60, a less aggressive target than its earlier announced goal of keeping it at 57.

Canadian National said higher freight rates and fuel surcharges, improving volumes for coal and U.S. grain, and a softer Canadian dollar all helped improve its balance sheet.

“I am really encouraged with the start that we have,” CEO Tracy Robinson said on a conference call with analysts and investors. Robinson took leadership of CN in the wake of former CEO Jean-Jacques Ruest’s retirement after a failed 2021 multibillion-dollar merger attempt with the smaller but strategically important Kansas City Southern and a campaign against him by one of CN’s largest shareholders, British billionaire Christopher Hohn’s TCI Fund Management Ltd. Hohn blamed Ruest for the ill-fated merger attempt, which was rejected on a 5-0 vote by the U.S. Surface Transportation Board, which cited antitrust and competitive concerns.

“Our team has the network running well, demonstrating improvements in service levels to our customers, driving greater velocity and generating strong financial results. We are preparing for a busy fall and are well positioned to achieve our 2022 outlook,” Robinson said.

At the halfway point of 2022, CN is running ahead of 2021’s pace for revenue and net income. Through six months, income was C$2.24 billion, higher than C$2.01 billion in the year-ago period, while revenue reached C$8.05 billion compared with C$7.13 billion in 2021. Operating ratio through the end of June was 62.8 compared with 62.0 in 2021.

Q2 2022 Quarterly Review En by Transport Topics

“We’re growing our bottom line and we are growing our top line, but we still have more work to do. But we’re off to a great start,” Robinson said. “We are building a team, doing it together and focused on bringing CN back to being a leader in the industry.”

Robinson came to CN in late February from an executive position at TC Energy. She previously spent 26 years at Canadian Pacific.

Across CN’s various business divisions, six reported double-digit increases in revenue.

Petroleum and chemicals reported a 21% increase to C$829 million compared with C$685 million in 2021, while metals and minerals improved 24% year-over-year to C$466 million from C$377 million.

Forest products saw a 14% jump to C$466 million from C$377 million.

Coal shipments notched a whopping 58% year-over-year hike to C$249 million from C$158 million.

Intermodal cargo, which is by far the railroad’s largest revenue generator, surged by 28% to C$1.32 billion from C$1.03 billion in 2021. Automotive-related cargo also increased by a strong 54% to C$208 million from C$135 million a year ago.

Other revenue moved upward by 2% to C$149 million from C$146 million.

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Grain and fertilizer shipments slipped 1% to C$604 million from C$609 million in 2021, the lone segment to see a decline.

CN said freight revenue per carload jumped 21% over the same period last year. The company said it ran an almost identical number of carloads with fewer employees, but noted it is actively hiring.

“Our head count is up 850 employees from the end of last year with the large part of that increase being conductors, as we prepare for a strong fourth quarter,” COO Rob Reilly said.

During the second quarter CN also endured a 16-day-long labor disruption when 750 Canadian employees with the International Brotherhood of Electrical Workers went on strike. The company has agreed to binding arbitration to settle the dispute, which the company said had “zero” impact on its overall operations.