CN Rail Stock : Why it missed Q1 Earnings Forecasts


FREIGHT TRAIN

Canadian National Railway (TSX:CNR)(NYSE:CNI) announced its March quarter results on Tuesday after the market closing bell. While the rail company managed to meet analysts’ revenue estimates for the quarter, its adjusted net profit missed expectations. This could be one of the main reasons why CNR stock fell by well more than 5% on Wednesday morning to as low as $148.41 per share — its lowest intraday level since October 2021. While CN Rail stock staged a recovery later during the session, it was still down by more than 2% for the day.

Before we take a closer look at what lies ahead for CN Rail stock, let’s take a closer look at its latest quarterly numbers.

CN Rail posts higher revenue despite lower volumes

In the first quarter, Canadian National Railway’s volumes on a revenue-tonne-miles (RTMs) basis fell by about 8% from a year ago. While the company denied demand issues, it blamed extreme winter conditions in the first two months of the year, supply chain issues, and a weak Canadian grain crop for its lower volumes in the last quarter.

Despite lower volumes on an RTM basis, CN Rail managed to post a 4.9% YoY (year-over-year) increase in its total revenue in the last quarter to $3.71 billion — also slightly higher than analysts’ estimate of $3.68 billion.

What affected CN Rail’s earnings in Q1?

CN Rail’s adjusted operating profit in the March quarter this year rose by around 4% YoY to $1.24 billion. Similarly, its adjusted net profit for the quarter rose by 6.1% YoY to $925 million. However, its bottom-line numbers fell more than 5% short of Street analysts’ expectation of around $978 million.

Apart from its lower revenue due mainly to factors such as supply chain disruptions and harsher winter weather, higher operating expenses also affected its profits in the last quarter. Notably, CN Rail registered a 12% YoY jump in its operating expenses in Q1 2022 to around $2.48 billion. Despite the lower average headcount, this increase in the Canadian rail giant’s expenses was primarily driven by the recent rapid rise in fuel prices.

CNR cuts 2022 EPS guidance

In January, CN Rail gave a strong 2022 earnings guidance. Back then, the company expected to deliver about a 20% increase in its adjusted earnings per share for the year. However, after facing multiple external challenges and growing worries about an economic slowdown, it now expects its earnings growth in the ongoing year to be between the range of 15-20%.

While commenting on CN Rail’s slashed 2022 guidance during the earnings conference call, its CEO Tracy Robinson said, “Harsh weather, mostly in Western Canada and supply chain disruptions impacted our ability to fully capitalize on the strong demand environment in Q1.” She added that “the uncertainty from the war in Ukraine and the continuing pandemic disruptions in China and elsewhere, all suggest just a little bit of caution on the year.”

What’s next for CNR stock?

After today’s sharp drop in CRN stock, it has erased all its year-to-date gains to turn negative. While CN Rail stock may continue to struggle in the near term after its guidance cut, the recent dip still makes its stock look attractive for long-term investors who want to add a fundamentally strong dividend stock to their portfolio, as its long-term growth outlook remains unchanged.

The post CN Rail Stock: Why it Missed Q1 Earnings Estimates appeared first on The Motley Fool Canada.

Should You Invest $1,000 In Canadian National Railway?

Before you consider Canadian National Railway, we think you’ll want to hear this.

Our nearly S&P/TSX market doubling Stock Advisor Canada team just released their top 10 starter stocks for 2022 that we believe could be a springboard for any portfolio.

Want to see if Canadian National Railway made our list? Get started with Stock Advisor Canada today to receive all 10 of our starter stocks, a fully stocked treasure trove of industry reports, two brand-new stock recommendations every month, and much more.

See the 10 Stocks * Returns as of 4/14/22

(function() { function setButtonColorDefaults(param, property, defaultValue) { if( !param || !param.includes('#')) { var button = document.getElementsByClassName("pitch-snippet")[0].getElementsByClassName("pitch-button")[0]; button.style[property] = defaultValue; } }

setButtonColorDefaults("#5FA85D", 'background', '#5FA85D'); setButtonColorDefaults("#43A24A", 'border-color', '#43A24A'); setButtonColorDefaults("#fff", 'color', '#fff');>

More reading

TFSA Investors: 3 Stocks to Buy as the Market Drops 1 Top TSX Railway Stock Beginners Should Buy and Hold Forever What to Watch on the TSX on Tuesday, April 26 Buy These 3 Dividend Stocks to Beat Inflation TFSA Pension: 2 Cheap Stocks to Start Your Retirement Savings Fund

The Motley Fool recommends Canadian National Railway. Fool contributor Jitendra Parashar has no position in any of the stocks mentioned.

https://www.fool.ca/2022/04/27/cn-rail-stock-why-it-missed-q1-earnings-estimates/

Comments

Post a Comment

Popular posts from this blog

Get Rich With These High-Yield Canadian Dividend Stocks

Image
Dividend stocks are one of the smartest ways to create wealth in the long term. By investing in dividend-paying stocks, one can generate returns in two ways: dividends and capital appreciation. As top dividend-paying companies generally have well-established businesses and a growing earnings base, they generate steady capital gains in the long term. Further, the reinvestment of dividends allows investors to accumulate more shares and create wealth in the long term.  With this background, let’s zoom in on three high-yield Canadian stocks that can help you get rich over time.  Enbridge  Enbridge (TSX:ENB) is a must-have dividend stock, and there are solid reasons behind that. Besides offering a lucrative yield of 6.7% (based on its closing price of $53.14 on May 10), the company has a resilient business that consistently delivers steady growth.  Enbridge owns extensive midstream assets and transports oil and gas. In addition, Enbridge has interests in renewable energy faci...
Read more

How much dividend income can you earn?

Image
Passive income. It’s one of the most common financial goals for Canadian investors. Everybody likes making money on a stock trade, but what could be better than a stock that pays you income year in and year out? Such are the kinds of stocks that Warren Buffett and other long-term investors made their fortunes on. This raises a question: Is it possible to make a truly substantial amount of money – let’s say $1,000 per month – with just dividend stocks? Such a thing would be very helpful if it could be done. Consider that, $1,000 per month is more than what the average Canadian gets from the Canada Pension Plan (CPP). If you take the average CPP payment ($811) and add $1,000 per month in dividend income to it, you get to a sum of money that could potentially pay all of your bills. In this article, I will explore the topic of making money with dividend stocks. I will show how much money you’d need to invest to get $1,000 a month in dividend income. I will reveal a stock that...
Read more

RRSP Wealth - Two Top TSX Dividend Securities to Buy Now or Own for 25 Year

Image
The market pullback is giving Registered Retirement Savings Plan (RRSP) investors a chance to buy top Canadian dividend stocks at undervalued prices for a self-directed portfolio focused on long-term total returns. TC Energy TC Energy (TSX:TRP)(NYSE:TRP) has raised its dividend in each of the past 22 years, and investors should see the distribution continue to grow at a steady pace. The energy infrastructure giant operates natural gas pipelines, oil pipelines, and power-generation facilities in Canada, the United States, and Mexico. The $28 billion capital program is largely focused on expanding the natural gas pipeline business, which already boasts 93,000 km of infrastructure. TC Energy has assets that connect the Marcellus and Utica shale plays in the United States to the Gulf Coast, where liquified natural gas (LNG) facilities cool the gas to the point where it becomes liquid and can be shipped to international buyers. In Canada, TC Energy is building the Coastal GasLink pi...
Read more