10.21
CNR reported operating EPS of $0.94, which compares to RBC CM’ estimate of $0.88 and consensus of $0.89. The variance was due to a $0.04 casualty reserve benefit and a lower effective tax rate (27% vs. RBC CM’ 30% forecast). A notable achievement in the quarter was that the 20% exchange-adjusted y/y decline in revenue was matched by a 20% reduction in costs – driven by good cost control and excellent operating efficiency metrics. While volumes remain challenged, management reiterated its optimism on certain product segments: 1) steel, iron ore, and chemicals improving sequentially; 2) met coal demand growing; 3) U.S. grain crop above average with Canadian outlook improving; and 4) intermodal helped by Prince Rupert traffic and steady domestic markets. Going into 2010, 55%-60% of the company’s contracts have been locked in at pricing in the 4%-5% range. RBC CM’ target price remains unchanged at $61. It maintains its Sector Perform, Average Risk rating.
No Comment.
Add Your Comment