CN Reveals Plan To Target Additional $700 Million Operating Income
CN (TSX: CNR) seems to be moving on days after the Kansas City Southern (NYSE: KSU) merger fell through. The railway company disclosed yesterday the details of its strategic and financial value creation plan, which includes targeting $700 million worth of operating income improvements.
The company also acknowledged the terminated transaction with KCS although it highlighted that the recent bid “reaffirmed CN as the premier North American railroad”. With its competitor Canadian Pacific Railway (NYSE: CP) still in play for the KCS acquisition deal, the company further stated that it will “ensure that all regulatory rules are enforced fairly, and customers do not suffer anti-competitive effects arising from a combination between Canadian Pacific and KCS”. The company is set to receive $1.4 billion in termination fees from KCS following the failed merger.
The strategic plan, which the Canadian railway firm calls “Full Speed Ahead – Redefining Railroading”, is hinged on fiscal improvements targeting to grow operating income and earnings per share by 20% in 2022.
According to the plan, the company will complete the remaining $1.1 billion of share repurchases by January 2022 and will further increase shareholder returns with more share repurchases worth around $5 billion for the rest of the year.
The transport company also expects to reduce capital expenditures in 2022 to 17% of revenue and plans to maintain this for the next two years. Lowering its operating ratio to 57% is also part of the plan and is expected to be achieved by prioritizing rail operations and streamlining management.
The company also integrated its environmental goals in the plan, including a 43% carbon emission intensity reduction target by 2030 and 15% less locomotive fuel per gross ton-mile.
CN last traded at $146.85 on the TSX.
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