Canadian National Railway Co. reported earnings that easily beat analysts’ estimates, as strong volumes allowed the railroad to increase prices and fuel surcharges to offset rising costs. 

Revenue in the second quarter was $4.34 billion (US$3.4 billion), topping the expected $4.08 billion and about 21 per cent higher than last year. The company said it was helped by a combination of higher freight rates and fuel charges as well as strong volumes of coal and US grain. A weaker Canadian dollar also gave sales a boost. 

Montreal-based Canadian National earned $1.93 a share on an adjusted basis, beating forecasts for $1.76 per share. The company also reiterated an earlier outlook that calls for 15 per cent to 20 per cent earnings growth for the full year compared with 2021. 

“I am really encouraged with the start that we have,” new Chief Executive Officer Tracy Robinson told analysts. “I feel more excited about the future of CN.” Robinson and other executives took a positive tone about the renewal of contracts and the company’s ability to raise prices, but didn’t map out any major changes to strategy. 

Freight revenue per carload jumped 21 per cent over the same period last year; the company ran about the same number of carloads with fewer employees. Automotive shipments went up 31 per cent and coal shipments rose 29 per cent. That helped offset weakness in Canadian grain exports and a 4 per cent decline in intermodal business. 

Pricing power has been key for the rail carrier. “We don’t guide on what our prices but we continue to do it well above inflation,” said Chief Marketing Officer Doug MacDonald. “So we’ve had great success on our contract renewals.”

OPERATING RATIO

Robinson is under pressure to boost efficiency at the railway, which has underperformed Canadian Pacific Railway Ltd. over the past several years. She took the helm in February when former CEO Jean-Jacques Ruest departed following a campaign against him by one of the company’s largest shareholders, Christopher Hohn’s TCI Fund Management Ltd.  

In April, Canadian National cut its outlook for profit growth and cash flow for 2022, saying it expected costs to be significantly higher, partly because of the cost of fuel. It set a target of getting its operating ratio below 60 per cent this year, a less aggressive goal than a previous target of 57 per cent. 

CN’s operating ratio in the second quarter was 59.3 per cent. The number is a key gauge of railway efficiency that measures expenses as a percentage of revenues. 

Executives said they are expecting a busy fall -- including a large grain crop in Western Canada -- and aren’t assuming an economic recession, for now. 

CN was hit by a labor strike during the last two weeks of June. The company has agreed to binding arbitration with 750 Canadian employees from the International Brotherhood of Electrical Workers.