CN, behind on the numbers

CN, behind on the numbers

Copyright 2004, Traffic World, Inc.

Canadian National Railway, known for sticking meticulously to schedules and paring down its operating ratio to an incredible 65.5 percent, is turning in surprisingly low performance numbers lately.

Shippers appear to be noticing, with a growing percentage saying CN service has deteriorated over the past six months, according to the Smith Barney survey. Usually cast as an icon of strong measures against its rivals, CN is in the uncomfortable position of addressing poor comparisons to its own earlier performance.

"Comparing last year's to this year's is not really an apples-to-apples comparison," said CN spokesman Mark Hallman. "Last year's numbers did not include the Wisconsin Central," which CN began accounting for in its service measures this year, he said.

"Our system still remains fluid, although we are seeing some problems in Chicago like everyone else."

A more accurate reflection of the railroad's overall performance was seen in the second quarter, Hallman said, when CN reported gross ton miles up 7 percent, carloadings up 12 percent, and record profits of $250 million.

"We have been able to use our operating leverage to bring the increase in revenues right down to the bottom line," Hallman said.

Wall Street, which keeps a close eye on railroads' operating performance, agrees. "Although CN's metrics show a sizeable slow down in average train speed (down 5.2 percent year-over-year for the week ending Aug. 13), and a deterioration in dwell hours (up 15.5 percent), we continue to believe CN's network remains fluid, as most of the year-over-year change is attributable to changes in freight mix and recent permanent yard closures," said rail analyst Jim Valentine of Morgan Stanley.

Besides, noted Valentine, "Reported operating metrics do not necessarily correlate with financial results."