Canadian National Railway Company (CNR) Q2 2024 earnings summary

Executive summary

• Revenues grew 7% year-over-year in Q2 2024 to $4,329 million, driven by strong pricing, higher volumes in Canadian grain, international intermodal, and refined petroleum products, despite lower revenue per ton mile and increased costs.

• Operating income declined 3% to $1,558 million, with adjusted operating income up 2% to $1,636 million, reflecting a $78 million loss on the Quebec Bridge transfer.

• Labor uncertainty in Canada led to international intermodal volume diversions and late-quarter volume deceleration, impacting business and prompting revised EPS guidance.

• Record volumes moved through the Vancouver corridor, but operational efficiency was hampered by heavy planned and unplanned maintenance work.

• Industry-leading customer service continued, with Southern and Eastern Regions outperforming last year, though Western Region challenges impacted overall results.

Financial highlights

• Q2 adjusted diluted EPS was $1.84, up 5% year-over-year, while reported diluted EPS was $1.75, down 1% due to a $78 million loss on assets held for sale.

• Q2 operating ratio was 62.2% (adjusted), up 160 bps year-over-year; reported operating ratio was 64.0%.

• Free cash flow year-to-date was $1,476 million, down 13% from last year, mainly due to lower net cash from operations and higher capex.

• Dividends per share increased 7% to $0.8450; share repurchases totaled $1,116 million in Q2.

• Fuel was a $0.10 EPS headwind and diluted OR by 130 bps; labor expense up 13% year-over-year.

Outlook and guidance

• Full-year 2024 adjusted diluted EPS growth now targeted at mid to high single digits, revised down from previous guidance, assuming no labor disruptions and RTM growth of 3%-5%.

• Adjusted ROIC for 2024 expected at ~15%, at the low end of the prior 15–17% range; capital investment guidance maintained at ~$3.5 billion.

• Long-term targets: 10–15% compounded annual diluted EPS growth and ROIC of 15–17% for 2024–2026, assuming a supportive economy.

• Share buyback of up to 32 million shares and 7% dividend growth planned.

• Assumes labor uncertainty resolved by end of August and no further disruptions.