Intermodal Volumes and Industrial End Markets Soften in Canadian National's Q4; 2023 Outlook Muted

Wide-moat Canadian National Railways' fourth-quarter revenue grew 16% year over year (removing foreign exchange) on higher fuel surcharges, core rate gains, and modest volume growth. Revenue was mostly in line with our forecast, but that was largely because strong yield gains (up 15%) offset lower-than-expected total-volume growth. The volume shortfall relative to our forecast stems from a faster-than-expected falloff in international-intermodal activity as retail-sector inventory restocking has dried up quickly. Relative to fourth quarter 2021, total volume rose 2% on strong Canadian grain (favorable harvest), higher export coal, and recovering auto carloads (easing of the semiconductor shortage for original equipment manufacturers, or OEMs), offset in part by flattish chemicals and plastics shipments (easing industrial production, or IP) and declines in intermodal and forest-product volumes.