Canadian National Railway Co. rode a wave of new shipping contracts and record volumes to a 12-per-cent jump in first-quarter profit.
CN late Monday posted net profit of $884-million and diluted earnings per share of $1.16 in the first three months of the year. Revenue rose by 8 per cent to $3.2-billion, compared with the same period a year earlier. Analysts expected per-share profit of $1.15 (both adjusted and net) and revenue of $3.2-billion, according to Bloomberg.
"The team was nimble and was able to jump at the opportunities," Luc Jobin, CEO of CN, said on a conference call from Regina ahead of the company's annual meeting on Tuesday.
Analysts say CN has outperformed its North American peers this year, aided by a network that touches three coasts and offers routes around the congested Chicago hub.
Montreal-based CN has seen volume gains that have outpaced those of Calgary-based rival Canadian Pacific Railway Ltd., partly by winning shipping contacts for Yang Ming Marine Transport Corp. and General Motors Co.
"My teams also took over the rail switching operations in the Vancouver south shore container terminals," said JJ Ruest, CN's marketing chief. That move, which replaced CP, led to a "pretty spectacular" rise in container revenue at the terminals, he said. "The team did outpace the economy and the industry," he said.
CN reported a 14-per-cent rise in revenue ton miles, a closely watched gauge of performance, in the first quarter. CN's total carloads rose by 10 per cent year to date, outpacing the North American average of 5 per cent, according to the Association of American Railroads.
For 2017, CN also on Monday raised its profit guidance to about 10 per cent growth over 2016. Mr. Ruest said three new container contracts from big retailers Canadian Tire Corp. Ltd., Lowe's Cos. Inc. and Rona Inc. are worth a total of $100-million.
In the first quarter, CN made gains across a range of goods, led by Canadian and U.S. grain and fertilizer, frac sand, autos, coal and overseas containers. Forest-products revenue fell by 3 per cent.
Petroleum and chemical shipment revenue rose by just 1 per cent as low oil prices and available pipeline space continued to dampen crude by rail volumes. Oil exports to the United States by rail fell by 21 per cent in 2016, according to the National Energy Board.
Mr. Ruest said some energy producers believe rising Alberta oil production could exceed pipeline capacity next year. But he said prices for western oil are too low to drive much volume to the rails. "At this point we're not extremely bullish on it, but if there is demand we can definitely meet it," Mr. Ruest said.
CN said it is boosting its capital spending this year by $100-million to $2.6-billion, including the purchase of 22 locomotives. Track infrastructure will account for $1.6-billion of that amount.
Meanwhile, CP's adjusted profit last week beat expectations as the carrier signalled recent increases in grain and potash shipments would help it boost profits by high single digits this year.
Share prices of both companies this year have outperformed the 3-per-cent gain of the S&P/TSX composite index; CN is up by 13 per cent while CP is up by 9 per cent.
CN is Canada's largest railway, with 22,000 employees and a 32,000-kilometre rail network that reaches the East Coast, West Coast and the Gulf of Mexico.