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CN: Q4 Profit Rises 18%, New CEO Appointed
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CN: Q4 Profit Rises 18%, New CEO Appointed

Canadian National Railway (TSE: CNR) increased its profits in the fourth quarter of 2021, shedding assets and cutting spending under pressure from TCI Fund Management. The largest national railway also appointed a new CEO.

Revenue & Earnings

Revenue came in at C$3.75 billion in the fourth quarter of 2021, an increase of 3% from C$3.66 billion in the prior-year quarter. Revenue ton miles (RTMs) decreased from C$63.21 million to C$56.56 million year-over-year.

The Montreal-based railway earned C$1.20 billion (C$1.69 per share) in Q4 2021, up from C$1.02 billion (C$1.43 per share) in Q4 2020.

On an adjusted basis, CN earned C$1.21 billion (C$1.71 per share) for the quarter, compared with C$1.02 billion (C$1.43 per share) a year ago.

The operating ratio increased by 3.1 points to 58.3%, whereas the adjusted operating ratio improved by 3.5 points to a fourth-quarter record of 57.9%.

CN expects to generate adjusted diluted EPS growth of approximately 20% in 2022, compared to adjusted diluted EPS of C$5.94 in 2021.

CEO Commentary

CN Rail president and CEO Jean-Jacques Ruest said, “I would like to thank our dedicated team of railroaders for delivering once again despite extreme weather and disruptive global supply chain issues. The last months of 2021 allowed us to tangibly demonstrate our resilience, our ability to make significant progress against the goals of our Strategic Plan, and what it means to build the premier railway of the 21st century. Our previous strategic investments in safety, technology, and capacity enabled us to continue delivering high-quality service to customers while generating profitable growth and enhanced value to shareholders.”

Jean-Jacques Ruest will step down from CN’s Board of Directors on February 28, but will remain at CN in an advisory role until March 31 to ensure a smooth transition. Tracy Robinson has been appointed as CN’s president and CEO and a member of its Board of Directors, effective February 28.

Wall Street’s Take

Following the results, Morgan Stanley analyst Ravi Shanker kept a Hold rating on CNR and raised its price target to C$158 (from C$150). This implies 2% upside potential.

Overall, consensus on the Street is that CNR is a Moderate Buy based on four Buys and 11 Holds. The average Canadian National Railway price target of C$167.42 implies 8.1% upside potential to current levels.

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