Luc Jobin, CN president and chief executive officer announced CN's third quarter results on October 25: "With solid execution from our industry-leading operating team and a network-wide focus on providing quality service, CN delivered outstanding results in the third quarter while facing a still sluggish North American and global economy."
CN highlighted these 3Q results:
Net income was C$972 million, or C$1.25 per diluted share, compared with net income of C$1,007 million, or C$1.26 per diluted share for the third quarter of 2015.
Operating income declined five per cent to C$1,407 million.
Revenues decreased by six per cent to C$3,014 million. Carloadings declined four per cent and revenue ton-miles declined 3%.
Operating expenses declined seven per cent to C$1,607 million.
A record 53.3% operating ratio, a 0.5-point improvement over the prior-year quarter's performance.
Free cash flow (1) for the first nine months of 2016 was C$1,743 million, compared with C$1,741 million for the year-earlier period.
Jobin continued: "Despite shifting traffic demands, including a delayed Canadian grain harvest, we remained flexible and service-focused. We also continued to reinvest in our business and infrastructure, investments that are driving ongoing safety, service and productivity improvements, while we maintained our commitment to providing the long-term value that helps CN and its customers succeed."
CN says it is raising its financial outlook and now expects 2016 adjusted diluted EPS to be up approximately 1% versus last year's adjusted diluted EPS (1) of C$4.44 (2) (compared with its July 25, 2016, financial outlook calling for 2016 adjusted EPS to be in line with last year).
CN further announced that its Board of Directors has approved a new share repurchase program. CN believes that the repurchase of its shares represents an appropriate and beneficial use of the Company's funds.Ghislain Houle, CN executive vice-president and chief financial officer, said: "CN has proven resilient in challenging market conditions by continuing to deliver solid financial results and free cash flow. Over the past five years, CN has repurchased 135 million shares, returning approximately C$8 billion to its shareholders. I am pleased that CN continues its track record of rewarding shareholders with this new program."
The new normal-course-issuer bid (Bid) permits CN to purchase, for cancellation, up to 33 million common shares, representing 5.1 per cent of the 649,072,911 common shares issued and outstanding of the Company not held by insiders on Oct. 17, 2016. On that date, 768,109,539 CN common shares were issued and outstanding.
The Bid – starting on Oct. 30, 2016, and ending no later than Oct. 29, 2017 – will be conducted through a combination of discretionary transactions and automatic repurchase plans through the facilities of the Toronto and New York stock exchanges, or alternative trading systems, if eligible, and will conform to their regulations.
Toronto Stock Exchange (TSX) rules will permit CN to purchase daily, through TSX facilities, a maximum of 280,418 common shares under the Company's Bid. Purchases under the Bid will be made by means of open market transactions or such other means as the TSX or a securities regulatory authority may permit, including private agreements or share repurchase programs under one or more issuer bid exemption orders issued by securities regulatory authorities in Canada.
The price to be paid by CN for its open market purchases of common shares will be the market price at the time of acquisition, plus brokerage fees. Purchases made under issuer bid exemption orders will be at a discount to the prevailing market price as per the terms of the order.
As at Oct. 24, 2016, CN has repurchased 28.3 million common shares under its share repurchase program announced in October 2015 at a weighted-average price of C$73.67 per share, excluding brokerage fees, returning C$2.08 billion to its shareholders. CN will continue purchasing shares under this program until Oct. 28, 2016.
CN also announced today that its Board of Directors has approved a fourth-quarter 2016 dividend on the Company's common shares outstanding. A quarterly dividend of thirty-seven-and-one-half cents (C$0.375) per common share will be paid on Dec. 30, 2016, to shareholders of record at the close of business on Dec. 9, 2016.