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 higher volumes in key segments, 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 assets held for sale.

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

• Record grain volumes moved through Vancouver amid heavy maintenance, causing temporary velocity and productivity issues in the West.

• The company remains focused on growth, disciplined scheduled railroading, and resolving labor uncertainty.

Financial highlights

• Q2 adjusted diluted EPS was $1.84, up 5% year-over-year, excluding a $78 million loss on the Quebec Bridge transfer; reported diluted EPS was $1.75, down 1%.

• Q2 revenues reached $4,329M, up 7% year-over-year, with RTMs up 7% to 59.9B.

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

• Free cash flow YTD at $1.5B, $200M lower than last year due to lower operating cash and higher capex; Q2 free cash flow down 14% to $947 million.

• Share repurchases totaled $1,116 million in Q2 and $1.7B YTD; dividends per share increased 7% to $0.8450.

Outlook and guidance

• 2024 adjusted diluted EPS growth now targeted at mid to high single digits, revised downward due to Q2 performance and labor uncertainty.

• RTM growth expected at 3%-5% for 2024; adjusted ROIC revised to approximately 15%; CAPEX guidance maintained at $3.5B.

• Long-term targets: 10–15% CAGR in diluted EPS 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 no rail or port labor disruption and continued intermodal momentum, but with headwinds from labor uncertainty and weak domestic demand.