Buying Opportunity for Investors at CN Rail

Canadian National Railway Co.’s (CNI) earnings forecast has been downgraded ay Canaccord Adams, but analyst Tom Varesh says the company's current valuation offers a buying opportunity for investors.

Mr. Varesh, who recently took over the transportation file from Robert Fay at the firm, said after reviewing the current market conditions – including a strong loonie, the weak U.S. economy and fuel prices – with just three weeks of carload data left to report in the year, he was reducing his estimates for revenue, net income and fully diluted earnings per share in the fourth quarter of 2007 and 2008.

Mr. Varesh said he now expects fully diluted earnings per share of C$3.66 in 2008, down from C$3.95, and he revised his 12-month target price to C$54.75, down from C$59 a share. He raised his recommendation on the stock to a “buy” from a “hold.”

“However, due to recent share-price weakness, we currently find the shares undervalued,” he said in a note to clients.

CN’s share price has seen a steady decline over the course of the month from a peak on Dec. 11 of C$52.61 a share to a closing price of C$47.32 on Wednesday.