- Canadian National Railway (CNI +2.3%) is upgraded to Outperform from Market Perform with a $104 price target, up from $94, at Raymond James, which also maintains its Outperform rating and $230 target on Canadian Pacific Railway (CP +3.2%).
- While improved Canadian rail traffic in Q4 helped both companies, James analyst Steve Hansen says CNI is “strongly outperforming,” as the company repatriates grain volumes that reportedly were lost in the previous year; he also highlights CP’s crude-by-rail portfolio, which saw a sharp decline in Q4 traffic.
- However, Hansen expects bulk commodities such as grain, potash and coal will regain momentum, and outsized headwinds such as crude-by-rail to become less of a drag.
- “Looking forward, while CN and CP both stand to benefit from the positive macro backdrop described, we are increasingly mindful of CP’s widening discount/valuation gap versus CN... therefore presenting an increasingly attractive entry point for long-term investors,” Hansen writes.