CNI Foresees Earnings Growth in 2014

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Leading railroad Canadian railroad, Canadian National Railway (CNI) has announced its earnings expectation for 2014.  In the upcoming year, the company expects earnings growth in double digit. It also expects capital expenditure to rise by approximatel    by 5% to C$2.1 billion ($1.98 billion). Free cash flow is expected between C$1.6 billion and C$1.7 billion next year in 2014. For the current year, Canadian Nationalestimatesadjusted EPS of C$3.05 to C$3.10.

We believe Canadian National optimism in its financial performance in the current year and beyond stems from its strong operating performance.  The company expects It expects strong demand across most of its businesses with improvements in wholesale and retail markets, underpinning 2–3% growth in business volumes for the year. In addition, pricing should also be favorable with growth above cost inflation. We expect the operating ratio to remain at the current level of high 60s on enhanced productivity from improving system velocity and fuel efficiency. Given these positive factors, we believe that the company will be able to achieve its projected high single-digit year-over-year earnings growth in 2013.

Further, the company maintains a free cash flow estimate of $800–$900 million in 2013 and has C$778 million in free cash flow attained in the first nine months of 2013. The improved liquidity profile of the company will not only support higher investment, but will also assure shareholder return via dividend payouts and share buybacks. With respect to share buybacks, the company announced repurchase of up to 15 million common shares over 12 months beginning Oct 29, 2013. During the third quarter, Canadian National completed its previously announced share repurchase of C$1.4 billion announced in October last year. In addition, the company has also announced a 2:1 stock split on its outstanding shares as of Oct 15, 2013.

Overall, Canadian National has returned approximately C$4.8 billion to its shareholders through share buybacks since 2010. Canadian National maintained dividend hikes for seventeen consecutive quarters since 1995. Following a 15% dividend hike in 2012, the company again raised its dividend by 12% to C$0.43 for 2013. Following the stock split, dividend payment per share amounts to C$0.215.

Canadian National, which operates with other stocks like Canadian Pacific Railway Limited (CP), Norfolk Southern Corporation (NSC) and Kansas CitySouthern (KSU).

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