Canadian National Profit Beats Estimates on Petroleum

Canadian National Railway Co. reported first-quarter profit that beat analysts’ estimates as shipments of petroleum and chemicals increased, offsetting higher weather-related costs such as fuel.

Excluding gains on rail-line sales, Canada’s largest railroad reported profit of C$551 million ($500 million) or 66 cents a share, exceeding the average 62-cent average estimate of analysts. Revenue rose 9.2 percent to C$2.69 billion, beating the C$2.62 billion average estimate.

Canadian National, based in Montreal, joins smaller rival Canadian Pacific Railway Ltd. and U.S. operator Union Pacific Corp. in overcoming severe weather during the first three months of the year. Increased demand for crude oil and a backlog of grain shipments boosted volume, even as the railway faced higher costs linked to an unseasonably cold winter.

“CN is already best-in-class from an operating ratio point of view,” Cameron Doerksen, an analyst at National Bank Financial, said in a telephone interview from Montreal before the results were released. “The main lever for them to improve margins is more volume-related. They have a fixed asset base, and if you drive more volumes over it you should be able to improve profitability.”

Operating ratio, a widely watched measure of railroad efficiency, deteriorated to 69.6 percent from 68.4 percent a year earlier.

Calgary-based Canadian Pacific today reported quarterly profit that beat analysts’ estimates, buoyed by a decline in benefits and compensation spending. Net income rose 17 percent to C$254 million ($231 million), or C$1.44 a diluted share.

Canadian National, in a statement today, reaffirmed a December forecast that per-share profit in 2014 will increase by at least 10 percent.

The railway boosted its capital expenditure budget for 2014 by 7.1 percent, to about C$2.25 billion, up from a December target of C$2.1 billion.

Canadian National rose 1.4 percent to C$63.86 today in Toronto. The shares have gained 5.4 percent this year, trailing the 6.9 percent increase in Canada’s Standard & Poor’s/TSX Composite Index.

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