Canaccord Adams Analyst: Not Looking Good for Canadian Railways

The current economic uncertainty and a looming North American recession led to a drastic cut in the earnings estimates for both of Canada’s largest railways Friday at Canaccord Adams.

Both Canadian National Railway Co. (CNI) and Canadian Pacific Railway Ltd. (CP) are expected to report their third quarter earnings over the next two weeks, and things are not looking good for the railways, according to Tom Varesh, Canaccord Adams analyst.

He said in a note to clients Friday:

In light of recent economic developments and the real possibility that the U.S. is currently or will be shortly in a recession, which is likely to last well into 2009, that a global slow down is taking place, and that Canada will also experience near zero growth in 2009, we have revised our [estimates for the second half of 2008] and 2009.

Mr. Varesh now expects fully diluted earnings per share of C$4.40 in 2009 for CP, down from C$6.07, and has placed a price target of C$52.75 a share, down from C$91.  He also lowered his estimate for CNI to C$3.86 per share in 2009, down from C$4.25, and slashed its price target to C$46.25 from C$63.75 a share.  Both were downgraded from a “buy” to a “hold” as well. 

Avi Dalfen, Blackmont Capital analyst, also reduced his price target for CNI to C$54 a share, down from his previous estimate of C$58, and maintained his “hold” rating on the stock Friday.

“We expect CNR's performance in the quarter to continue to be affected by softness in the forestry and auto sectors along with higher fuel expenses,” he said in a note to clients.

However, Mr. Dalfen added that he expects earnings for the third quarter to be C$0.99 a share, up from C$0.93 last year, and below the Street’s consensus of C$1.

Comments

[algo41:]

If analysts really believe their earnings projections, why would they slash their targets so much? Presumably, earnings will bounce back once recession is over.

2008 Oct 20 07:00 AM

[wallyjm:]

some more stock price manipulation to knock down prices for short sellers?

2008 Oct 20 01:05 PM