Is Canadian National Railway (CN) showing signs of potential long-term growth? (Tony Hatch)

20161212 Tonyhatch (Cropped)

One clear sign of growing CN confidence is their re-opening of their training centers in Chicago and Winnipeg (also another sign of CN’s willingness to invest in the future; one hopes that the STB and TC and the rest take note).

  • Operating stats were supportive:  Crew starts were down 14% with volume down 6% (in carloads – down 7% in RTMs).  Crew productivity was up 17%.  From the depths of July dwell improved by 24% and car velocity by 25% Full-Q dwell was up 25% and velocity -5%).  Train length was up 6%, weight by 4%, fuel efficiency (invented there) by 3% to 0.85.  Safety improved – in a pandemic/sawtooth quarter – by 19% (injuries) and 22% (FRA accidents).

  • Financial goals were supportive of a long term growth strategy:
    • Share buybacks still paused to maintain their industry best investment-grade financial rating.
    • Debt/EBITDA (adjusted) at 2.17X slightly above target (stated as “1.7X-1.9X”) – all will be “revisited” in the January call.
    • Capex to remain in the ~20% range with current investment opportunities in the grain supply chain (including the next-gen hoppers) – which will be supported (as always) by ROIC.
    • No update on their Wisconsin line segment sale process, nor on their petition to the STB to change the restrictive requirements imposed in the CSX/”Massena Line” acquisition deal.