Canadian National Railway (TSX:CNR) is due to report earnings after markets close as of writing this article. CNR stock may have a long history of performance on the market, but it’s also had quite an interesting recent past. Today, let’s look at the changes CNR stock has made and what investors should expect from the railway during its next earnings report.
About CNR stock
CNR stock is one of the largest and most prominent transportation companies in North America, with a rich history spanning over a century. It operates an extensive network of rail lines spanning Canada and extending into the United States, with connections to key ports, cities, and industrial centres. Its network covers approximately 32,000 kilometres of track, making it one of the most comprehensive rail systems on the continent.
Under Hunter Harrison, the company expanded its operations into a premium railway line. CNR stock has been investing heavily in expanding its network and improving its infrastructure. This includes investments in new tracks, terminals, and technology to enhance efficiency and capacity.
It also has experienced significant growth in its intermodal business, which involves the transportation of shipping containers and truck trailers. This growth has been driven by the increasing demand for freight transportation services, particularly in the e-commerce sector.
Growth to roots
In the last five years, however, CNR stock was trying something new. After streamlining routes, improving scheduling, and implementing new technologies like Positive Train Control (PTC) to enhance efficiency and on-time performance, the company wanted more growth.
This came down to the battle for Kansas City Southern, with CNR stock making the first move back in 2021. CNR stock offered a cash-and-stock deal valued at US$33.7 billion, or $325 per share, for KCS in August 2021. Both CNR and Canadian Pacific Kansas City increased their offers throughout the process, with CNR’s final offer reaching US$34 billion. However, KCS opted for CP Rail’s offer in August 2022, citing it as a “superior proposal” due to regulatory and antitrust considerations.
This led CNR stock to go back to its routes after a period of volatility. But this, in turn, has made the company highly profitable at a time when companies across the world need to hold onto cash. In fact, it’s turned CNR stock into a value stock once more.
Recent performance and earnings
So, now, we can look at whether there has been some positive momentum that could continue during the first quarter of 2024. This can be done by looking at the recent few quarters to see if the stock has seen more and more positive growth.
During the second quarter, CNR stock reported revenue of $4.057 billion, with operating income of $1.6 billion. It also reported that the next half of the year could be weaker than anticipated. And that came to fruition in the third quarter, with revenue of $3.987 billion, and operating income of $1.517 billion.
By the fourth quarter, revenue improved significantly, however, to $4.471 billion, and operating income to $1.818 billion. The company then announced it expects to deliver adjusted earnings per share (EPS) growth of 10%. Further, the company said it would be investing $3.5 billion in its capital program. This EPS growth should continue between 2024 and 2026.
Bottom line
How is the company keeping up with these levels? Traffic volumes and expenses could be stabilizing, with interest rates getting under control as the company brings down debt. And given its financial stability, the company looks well positioned to have a strong first quarter.
