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CN Rail’s 2013 profit forecast disappoints
Canadian National Railway forecast a 2013 profit that fell short of analyst expectations, sending shares of the country’s biggest rail carrier lower even as it posted higher quarterly earnings and increased its dividend.Canaccord Genuity analyst David Tyerman said he had estimated 2013 earnings at C$6.05, an 8 percent increase that reflected increased pension costs that the company warned about last quarter.
“This has to be taken into context,” Tyerman said. “The stock is up a good amount over the last year and we’re not exactly down a huge amount, we’re down just over 1 percent. So it’s hardly telling you it’s a disaster.”
The company’s stock may not be “priced for perfection,” he added, but there are high expectations from the railway, which boasts top-notch operating efficiency.
CN’s operating ratio, a key measure of a railway’s productivity, improved by 1.1 points to 63.6 percent in the fourth quarter. The lower the ratio, which calculates operating costs as a percentage of revenue, the more efficient a railway.
For all of 2012, the ratio was 62.9 percent, a 0.6 point improvement over 2011.
The Montreal-based railway said its 2013 estimates reflect an approximate C$150 million ($150.9 million) headwind from increased pension expenses.
“For 2013, CN anticipates continued gradual improvement in the economy and further growth opportunities in intermodal, energy and other resource markets,” Chief Executive Claude Mongeau said in a statement.
The company expects to generate between C$800 million and C$900 million in free cash flow in 2013 and spend C$1.9 billion on capital investments.
CN also announced a 15 percent increase in its quarterly cash dividend.
For its fourth-quarter, CN said profit rose to C$610 million, or C$1.41 a share, from C$592 million, or C$1.32, a year earlier. Revenue climbed 7 percent to C$2.5 billion. (Reuters)
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