OREANDA-NEWS. CN (TSX: CNR) (NYSE: CNI) reported its financial and operating results for the fourth quarter and year ended Dec. 31, 2014.

Fourth-quarter and full-year 2014 financial highlights

Fourth-quarter 2014 net income was CAD 844 million versus net income of CAD 635 million for the same period of 2013.

Q4-2014 diluted earnings per share (EPS) increased 36 per cent to CAD 1.03 from diluted EPS of CAD 0.76 for the final quarter of 2013.

Full-year 2014 net income was CAD 3,167 million, or CAD 3.85 per diluted share, compared with net income of CAD 2,612 million, or CAD 3.09 per diluted share, for 2013.

Full-year 2014 adjusted diluted EPS increased 23 per cent to CAD 3.76, with adjusted 2014 net income of CAD 3,095 million versus adjusted net income of CAD 2,582 million in 2013. (1)

Full-year 2014 volumes reached record levels, with carloadings up eight per cent and revenue ton-miles up 10 per cent.

Q4-2014 operating income increased 30 per cent to CAD 1,260 million, and full-year 2014 operating income rose 19 per cent to CAD 4,624 million.

The fourth-quarter 2014 operating ratio improved by 4.1 points to 60.7 per cent; the full-year 2014 operating ratio improved by 1.5 points to 61.9 per cent.

2014 free cash flow totalled CAD 2,220 million, compared with free cash flow of CAD 1,623 million for 2013. (1)

Claude Mongeau, president and chief executive officer, said: "CN delivered a strong fourth-quarter 2014 performance, concluding a remarkable year characterized by brutal first-quarter winter weather, followed by a strong rebound starting in March, and capped by record full-year freight volumes. We're particularly proud of our solid operating performance that allowed us to move record volumes of Western Canadian grain and equally strong U.S. grain shipments.

"Our agenda of Operational and Service Excellence is clearly working. This momentum is helping us to grow CN's business faster than the overall economy and to do so at low incremental cost. This will provide us with a strong foundation for 2015, a year in which we see continued opportunities for growth in energy-related commodities, intermodal traffic, and commodities tied to U.S. housing construction, automotive sales and other consumer spending."

Positive 2015 outlook, increased dividend (2)

Mongeau said: "CN is optimistic about its future prospects. The Company is aiming to deliver double-digit EPS growth in 2015 over adjusted diluted 2014 EPS of CAD 3.76. In addition, CN plans to increase its capital spending by roughly CAD 300 million for a total 2015 investment of approximately CAD 2.6 billion.

"Given CN's strong balance sheet and its solid outlook for earnings and free cash flow generation, I am pleased to announce that the Company's Board of Directors has approved a 25 per cent increase in CN's 2015 quarterly common-share dividend. CN has increased its dividend per share by 17 per cent per year on average since its privatization in 1995."

Full-year 2014 revenues, traffic volumes and expenses

2014 revenues increased 15 per cent to CAD 12,134 million. Revenues increased for petroleum and chemicals (21 per cent), grain and fertilizers (21 per cent), metals and minerals (20 per cent), intermodal (13 per cent), automotive (12 per cent), forest products (seven per cent), and coal (four per cent).

The rise in total revenues was mainly attributable to higher freight volumes due to a record 2013/2014 Canadian grain crop, strong energy markets, particularly crude oil and frac sand, new intermodal and automotive business; the positive translation impact of the weaker Canadian dollar on U.S.-dollar-denominated revenues; and freight rate increases.

Carloadings for 2014 increased eight per cent over 2013 to 5,625 thousand.

Revenue ton-miles, measuring the relative weight and distance of rail freight transported by CN, increased by 10 per cent in 2014 over 2013. Rail freight revenue per revenue ton-mile, a measurement of yield defined as revenue earned on the movement of a ton of freight over one mile, increased by four per cent in 2014 over the previous year.

Operating expenses for 2014 increased by 12 per cent to CAD 7,510 million, mainly due to the negative translation impact of a weaker Canadian dollar on U.S.-dollar-denominated expenses, increased purchased services and material expense, higher fuel costs, as well as increased labor and fringe benefits expense.

The operating ratio was 61.9 per cent in 2014, an improvement of 1.5 points over the 2013 operating ratio of 63.4 per cent.