* CN sees high single-digit EPS growth in 2013
* Quarterly profit rises, matches expectations
* Quarterly dividend increased 15 pct
By Susan Taylor
TORONTO, Jan 22 Canadian National Railway
forecast 2013 profits on Tuesday 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.
The Montreal-based railway said it expects earnings per
share in 2013 will grow in the high-single digits, on a
percentage basis, a marked slowdown from the past two years.
CN stock, which has powered about 19 percent higher over the
past year, closed down just over 1 percent on the TSX.
"If you look at the earnings growth that they're calling
for, high single digits, that's down from roughly 16 percent
last year," said Raymond James analyst Steve Hansen.
"Which really does suggest the cycle's maturing a little bit
here and that brings in the question, what multiple you're
willing to pay for the stock.
There have been lofty expectations for CN, which boasts
top-notch operating efficiency and trades at 15 times 2012
CN's guidance implies 2013 earnings of C$6.11 a share, said
BMO Capital Markets analyst Fadi Chamoun, a figure that trailed
his earlier forecast of C$6.15 and the mean analyst estimate of
C$6.22, according to Thomson Reuters I/B/E/S.
Still, analysts said CN management is typically cautious in
its full-year forecasts.
"This has to be taken into context," said Canaccord Genuity
analyst David Tyerman. "The stock is up a good amount over the
last year and we're ... down just over 1 percent. So it's hardly
telling you it's a disaster."
PENSION, DEPRECIATION NIPS PROFIT
CN's fourth-quarter results largely matched expectations.
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, stoked by a 15
percent increase for coal, 13 percent jump for petroleum and
chemicals, and 11 percent gain for grain and fertilizers.
Revenue for intermodal, or containers carrying a variety of
goods transported by more than one form of carrier, rose 7
The gains were party offset by a 2 percent decline in forest
product revenue and 1 percent drop in metals and minerals.
CN also announced a 15 percent increase in its quarterly
dividend to 43 Canadian cents.
Looking ahead for 2013, CN said an approximate C$120 million
($120.79 million) increased pension expense and C$30 million for
rising depreciation costs will bite into earnings.
"The economy is sluggish," said Chief Executive Claude
Mongeau on a conference call with analysts. "We are determined
to outpace economic conditions."
CN hopes to boost its intermodal business as it opens two
new U.S. terminals this summer and launches new services, Chief
Marketing Officer Jean-Jacques Ruest said on the call.
Resource and energy markets, notably crude-by-rail, are also
expected to help drive a 3-4 percent increase in carloads.
The company, which expanded its headcount by less than 2
percent in 2013, sees a 1 percent staffing increase in 2013 as
it boosts efficiency by running longer, heavier trains.
CN estimates 2013 free cash flow generation between C$800
million and C$900 million, a decline from C$1 billion in 2012,
and plans to spend C$1.9 billion on capital investments.
The company's operating ratio, a key measure of a railway's
productivity, improved by 1.1 points to 63.6 percent in the
fourth quarter. A lower ratio, which calculates operating costs
as a percentage of revenue, indicates greater efficiency of a
For all of 2012, the ratio was 62.9 percent, a 0.6 point
improvement over 2011.
Shares of CN fell 99 Canadian cents to C$93.77 on the
Toronto Stock Exchange.