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CN’s 1Q16 adjusted EPS of $1.00/share was ahead of FCC/street expectations of $0.93/share.
Companies: Canadian National Railway Company
We expect CN carloads to be down 6.4% in 1Q16 y/y as result of significant declines in metals and minerals, coal and petroleum products. Due to exposure to commodity prices impacting shipping volumes, we expect a 3.6% y/y decline in 1Q16 revenue, down to $2.99 billion. We predict 1Q16 adjusted diluted EPS of $0.93/share, in line with consensus, which represents an increase of 7% when compared to 1Q15. Due to changes to our expectations, we have lowered our 12-month target price to $87.50/share,
On February 10, 2016, CN announced further details of its 2016 capital investment guidance of $2.9 billion. CN plans to spend $1.5 billion on track infrastructure, $600 million on rolling stock equipment, $400 million on Positive Train Control (PTC) technology, and $400 million on other initiatives. CN will spend 52% of its capital investment or $1.5 billion on track infrastructure, including replacements of rail and ties, bridge maintenance (this alone took $100 mm in 2015, or about $500,000/br
On Friday February 5, 2016, after market close, CN announced that it will repurchase a portion of its common stock under a specific share repurchase program, which will form part of CN's 12-month normal course issuer bid (NCIB) totaling 33 million shares announced on October 27, 2015. The daily repurchases will cap out at 1,500,000 of CN common shares with the bids running from March 1, 2016 to March 11, 2016. CN will be purchasing the common shares from a third party at a price that will be neg
CN has proven its capacity to operate efficiently and produce at the bottom line. Based on our new estimates and an NAV (Atax, 8%) of $89.37 per share, we have increased our 12-month target price to $90.00 per share and upgraded our ranking to Outperform.
On Thursday January 7, after market close, CN announced that it has submitted an Environmental Impact Statement (EIS) for its proposed $250 million logistics hub in Milton, ON, to the Canadian Environmental Assessment Agency (CEAA). The EIS outlines specific measures that CN plans to follow in an effort to limit the project's environmental impact on the community and demonstrates commitment to the project.
On Tuesday January 5, after market close, CN announced that it has filed a final shelf prospectus with Canadian securities regulators and a registration statement with the United States Securities and Exchange Commission (SEC), for which the Company may issue up to C$6 billion of debt securities in both Canadian and U.S. markets over the next 25 months.
Nearing the end of the quarter and the year, CN’s 2015 will clearly not match the growth seen in 2014, when adjusted earnings grew 23%.
For FY2015, we expect adjusted EPS will grow by 16%, fulfilling CN’s guidance for ‘double-digit’ earnings growth. Year-over-year, CN’s carloads are down 2.4% and in 4Q15, carloads are down 8.2%. Excluding the ~100,000 carload drop from reduced iron ore shipments, carloads are down ~1% in 4Q15. We now anticipate only 3.6% in revenue growth in 2015 versus 2014. W
Impact: Positive. CN's agreement with a third-party seller is accretive to the stock as the Company is purchasing the shares for less than it would have to pay in the open market.
Canadian National Railway Company (CNR): 3Q15 Adj. EPS of $1.26 Beats Consensus/FCC Estimates, Record Operating Ratio of 53.8%, 12MTP Remains at $85/share, Maintain Market Perform Ranking.
CN’s 3Q15 EPS of $1.26/share beat consensus ($1.15/share) and our $1.17/share forecast. Revenues were up 3% and CN cut operating costs by 5% y/y, and posted a record operating ratio of 53.8%. The record operating ratio demonstrates CN’s ability to cut costs quickly in a slowing economy. We maintain our 12-month target price of $85.00/share and our Market Perform rating.
As 3Q15 comes to a close, we are updating our outlook before the release of CN’s quarterly financial statements (scheduled for October 27, 2015). The update includes changes that have little aggregate impact on our long-term outlook. Our DCF-NAV still remains at $85.31/share, matching our target and, therefore, maintaining our Market Perform ranking. We have increased our 3Q15 est. EPS from $1.14 to $1.17/share but maintained our FY2015e EPS at $4.25/share.
On September 15, before market open, CN announced a public debt offering of C$350 million 2.8% Notes due 2025, C$400 million 3.95% Notes due 2045, and C$100 million 4.0% Notes due 2065. The offering is expected to close on Sept. 22, 2015. The funds are intended to be used for general corporate purposes, including repayment of outstanding debt and share repurchases.
CN announced after market close on August 12, 2015 that company President and CEO Claude Mongeau will be taking medical leave to have a rare form of pre-cancerous tumor removed from his larynx, and that the removal of the tumour in late August/early September and one-month recovery will then be followed by about six weeks of preventative radiation therapy. CFO Luc Jobin will lead the CN executives during Mr. Mongeau's recovery.
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