07.26
CN reported Q2/09 FD EPS from continuing operations of $0.76 (in line with
consensus) versus $0.90 last year. GAAP FD EPS was $0.82, but this
included a deferred income tax recovery $28 million ($0.06/share).
Operating ratio was up one point to 67.3%.
CN noted that rail volumes appear to have hit a bottom, with CN posting
m/m volume growth (echoing comments made by CSX). While we do expect
H2/09 volumes to improve versus the first half of the year, we are likely to
see a slower ramp with a full recovery being pushed out into 2010.
While the Teck/CP negotiations went to FOA (final offer arbitration), we do
not expect an increase in shippers seeking to go down this route to settle
contracts. There have been no changes to the Canadian rail regulation and
captive shippers have always had the opportunity to go to FOA.
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