Canadian National Railway Co. surprised the market by inadvertently releasing its first-quarter earnings two hours ahead of schedule on Monday, but the dip in profit was highly anticipated.
CN was scheduled to issue its quarterly results after markets closed on Monday, but accidentally posted them mid-afternoon. After withdrawing them for a few minutes, the company then officially posted the earnings in full a short time later.
Harsher winter weather lowered CN's profits compared to the previous winter, as heavy snows caused congestion.
The railway posted a profit of $555-million, or $1.30 a share, in the first quarter, down from $775-million, or $1.75 a share, in the same period a year ago.
Excluding gains on rail-line sales in both years, adjusted earnings were $519-million, or $1.22 per share for the quarter, compared with $523-million, or $1.18 per share a year ago when the company had more shares outstanding.
CN's operating ratio – a percentage of costs over revenue and therefore a closely watched indicator of efficiency – worsened to 68.4 per cent from 66.2 per cent for the same period a year earlier. This was largely expected, however, by analysts.
Montreal-based CN also announced a second-quarter dividend of 43 cents a share to be paid on June 28, for all shareholders on record as of June 7.
"Overall, we would characterize the quarter results as weak, but not entirely unexpected. Key is management's messaging that the company has now turned the corner and performance metrics are improving," said analyst Walter Spracklin of RBC Dominion Securities Inc.
CN's chief executive and president Claude Mongeau said the company has "turned the corner" and is "improving train velocity and reducing freight car dwell times in yards across the network to restore the service level expected by our customers."
The railway is also increasing its capital investment by $100-million more than planned to $2-billion in 2013, with more than half of that total going toward track improvement. Among the projects are capacity upgrades in the Edmonton-Winnipeg corridor.
This was also the first quarter without operations executive Keith Creel, who was enticed to join Canadian Pacific Railway Ltd. by that railway's chief executive Hunter Harrison.
As Scotia Capital Inc. analyst Turan Quettawala said in a recent research note, "A slow recovery may cause some concern with investors due to management turnover."
CN said the first-quarter revenue increase was mainly attributable to rate increases and higher freight volumes. Revenues increased from petroleum and chemicals (up 17 per cent), intermodal (7 per cent), metals and minerals (3 per cent), forest products (2 per cent), automotive (2 per cent) and grain and fertilizers (1 per cent). Coal revenues declined 1 per cent, the company said.