Canadian National Railway pany(US:CNI)2022-10-25 22:07Financial Data and Key Metrics Changes - The company expects a 25% increase in EPS for the year, up from the previous expectation of 15% to 20% growth [12] - Free cash flow is projected to be approximately $4.2 billion, an increase from the prior guidance of $3.7 billion to $4 billion [12] - Q3 EPS reached $2.13, a 40% increase on an adjusted basis, representing a quarterly record [16][44] - Operating ratio improved to 57.2%, which is 180 basis points lower than the adjusted operating ratio for the same period last year [44] Business Line Data and Key Metrics Changes - Volumes increased by 5% on an RTM basis, contributing to record revenue of $4.5 billion, a 26% increase over Q3 2021 [14][29] - The petroleum and chemicals segment showed sustained strength, particularly in refined products and crude oil volumes [31] - Intermodal volumes were flat overall, but Halifax saw a 21% increase in volumes [32] Market Data and Key Metrics Changes - Canadian grain volumes are expected to remain strong into next year, with the company recording the second-largest amount of Canadian grain moved in September [30] - Demand for automotive is anticipated to remain strong due to a backlog of 9 to 12 months [34] - Signs of market softness were noted in international intermodal and lumber prices, which have dropped significantly [35][36] Company Strategy and Development Direction - The company is focused on a scheduled operation to improve service consistency and operational efficiency [9][10] - There is a commitment to invest in capacity, including adding locomotives and railcars to accommodate growth opportunities [26][39] - The EMP program partnership aims to enhance intermodal service coverage across North America, potentially increasing volumes by 5% [40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to manage through potential economic downturns due to a diverse book of business [66] - The company is closely monitoring inflation impacts on costs and is committed to controlling expenses [49] - Preparations for winter operations have been enhanced based on lessons learned from previous years [85] Other Important Information - The company has repurchased nearly 23 million shares for $3.5 billion as of the end of September [45] - The average price of WTI is expected to be approximately $95 per barrel for 2022 [47] Q&A Session Summary Question: Capacity management and potential congestion - Management emphasized the importance of understanding network capacity and selling only what can be delivered [53] Question: Labor cost accrual details - The $47 million accrual was related to a tentative agreement reached with unions in the US [58] Question: Economic downturn preparation - Management highlighted the diverse business portfolio and the ability to adjust resources based on market conditions [66] Question: Yield and pricing outlook - The company is focused on maintaining inflation plus pricing and expects this trend to continue into 2023 [74] Question: Market share recovery opportunities - Management noted that they are still sold out at key intermodal locations and expect to regain market share as supply chains normalize [77] Question: Impact of a stronger US dollar - A stronger US dollar has mixed effects, but overall, it does not significantly impact the company's performance [90]