Strong Earnings and Other Positives for Canadian National Railway

| About: Canadian National (CNI)

Shares in Canadian National Railway Co. (NYSE:CNI) rallied Friday after its better-than-expected fourth quarter earnings a day earlier.

While the Street acknowledged the country’s largest railway would continue to see its volumes shrink in 2009 [they are already down 20% since the start of January] there are number of factors working the company’s favor.

“We believe that CN Rail is well placed to weather this downturn and at current valuation represents a compelling investment opportunity,” said Fadi Chamoun, UBS analyst.

Management said on a call Thursday that pricing remained strong, and most analysts expect favorable comparables in the first part of the year due to a weaker loonie increasing the value of its U.S.-based sales, increased volumes at the port of Prince Rupert and improved fluidity due to the integration of Elgin, Joliet, and Eastern, which was finally approved Thursday.

David Newman, National Bank Financial analyst, said:

Volumes declined progressively throughout the quarter. However, previous headwinds, namely soaring fuel prices (and the two-month lag on recovery) and FX, turned into tailwinds, with the fuel surcharge providing a per share benefit of C$0.15 and FX providing a C$0.10 tailwind.

Mr. Newman increased his earnings estimate for 2009 to C$3.97 as share, from his previous estimate of C$3.88.

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Tagged: , Railroads, Canada, Earnings
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