North America's economic recovery is gathering steam, with demand surging for everything from freight services to washing machines to bulldozers.
Three companies that are considered key bellwethers for the economy reported strong profits and higher forecasts, including Canadian National Railway Co., one of the continent's largest transportation businesses.
CN, which is seen as a barometer for the economy because the carrier hauls a wide range of goods, raised its outlook for 2010 after posting strong financial results in the first three months of this year.
"It's clear that the economy is on a recovery mode, perhaps a little bit faster than we anticipated up until now," CN chief executive officer Claude Mongeau said during a conference call Monday. "We have good growth across all of our businesses."
CN's optimistic tone coincided with financial reports from two major U.S. companies that announced their first-quarter profit blew past analysts' expectations, prompting executives to issue rosier forecasts for this year's profit.
Appliance maker , whose results are watched as a measure of both consumer spending and the housing market, said its first-quarter profit surged 141 percent to $164-million (U.S.), while which makes construction and farming equipment, reported a $233-million profit, compared with a loss in the same quarters in 2009.
CN's first-quarter profit jumped 21 per cent to $511-million (Canadian), exceeding Bay Street's earnings forecasts. The country's largest freight carrier moved more carloads of coal, grain, fertilizer, lumber and autos.
The railway is estimating cash flow this year of roughly $1-billion, up from $700-million previously forecast.
That, in turn, is causing CN to spend more. The budget for CN's capital spending program has been raised to $1.6-billion for 2010, up $100-million from the last allotment.
Mr. Mongeau, who replaced the retiring Hunter Harrison as CEO on Jan. 1, said CN hopes to take advantage of the economy's rebound.
"We have our eye on the ball," Mr. Mongeau said. "We are focused on protecting the legacy of operational excellence that was developed over the last several years under Hunter's leadership."
Some of the railway's revenue is in U.S. dollars, so the strong loonie dampened the results, reducing profit for the three months ended March 31 by $41-million, or 9 cents a diluted share. Montreal-based CN's first-quarter revenue still climbed 6 per cent to $1.96-billion.
Calgary-based Canadian Pacific Railway Ltd. is also expected to report improved first-quarter results when it releases its financial report on Wednesday.
For the week ending April 17, North American carload traffic at CN and CP rose an average of 24.3 per cent, compared with the same week in 2009, according to the Association of American Railroads. Weekly coal shipments rose an average 47.6 per cent, while chemical deliveries jumped 46.4 per cent.
A March survey of private-sector economists forecasts that the Canadian economy will expand by 3.1 per cent this year, higher than an estimate of 2.6 per cent in Ottawa's recent budget, the federal Finance Department said Monday. And Canada's unemployment rate is projected to steadily fall over the next four years or so.
In this year's first quarter, CN had a 69.3-per-cent operating ratio, a key indicator of productivity that measures operating costs as a percentage of revenue. A lower operating ratio is better, and CN's ratio improved from 71.7 per cent in last year's first quarter.
"We have good momentum," Mr. Mongeau said.
Whirlpool now forecasts its 2010 profit could be as high as $8.50 (U.S.) a share, up from its previous range of $6.50 to $7.00, while Caterpillar expects its profit this year to be in the range of $2.50 to $3.25 a share, compared with $2.50 targeted before.Report Typo/Error