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CN Rail reports rise in Q2 profit, revenue

A CN locomotive makes it's way through the CN Taschereau yard in Montreal, Nov., 28, 2009. THE CANADIAN PRESS/Graham Hughes
July 25, 2012 - 8:31 AM

MONTREAL - CN Rail (TSX:CNR) is reporting net income of $631 million for the second quarter, or $1.44 per diluted share, compared to year-earlier net income of $538 million, or $1.18 per diluted share.

The Montreal-based company says revenues increased 13 per cent to $2.54 billion for the quarter over the same period in 2011.

The operating ratio — a key performance metric in the railroad industry that calculates the percentage of revenues spent to operate the railroad —was 61.3 per cent, unchanged from the year-earlier.

Excluding grain and fertilizers, CN says it registered solid traffic increases in every commodity group in the second quarter.

Adjusted earnings per share — which excluded a net income tax expense of six cents per diluted share — came in at $1.50, beating analyst estimates.

Analysts' estimates compiled by Thomson Reuters put revenue at $2.51 billion for the second quarter, and earnings per share were estimated at $1.48.

The company also revised its financial outlook upward for 2012, saying it will deliver up to 15 per cent growth in adjusted diluted earnings per share for the year despite an additional pension expense of approximately $100 million.

That compares with CN's April outlook calling for 10 per cent growth in 2012 adjusted diluted EPS.

It also says it will generate free cash flow of approximately $1 billion, compared to April's outlook calling for free cash flow of $950 million.

CN's former chief executive Hunter Harrison is now president and CEO of competitor CP Rail.

Harrison, 67, is credited with turning CN into North America's most successful railway company — a track record lauded by Canadian Pacific's largest shareholder in its push for change at the top.

CN argued during a highly public battle between CP's former leaders and activist shareholder William Ackman that Harrison continued to have contractual obligations to his former employer.

In late June, CN issued a statement congratulating Harrison on his appointment but warning that it won't be dropping a legal battle it launched earlier this year.

The statement said CN wouldn't attempt to block Harrison from taking the job at this time, but reserved its right to "exercise any and all legal options available to it in connection with this action.''

CN has said it was concerned that it will be difficult, if not impossible, for Harrison to perform his new duties for CP without drawing upon his broad knowledge of CN's confidential information, which he is not permitted to do.

News from © The Canadian Press, 2012
The Canadian Press

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