Canadian National Railway: All Aboard

| About: Canadian National (CNI)

By David Berman

Canadian National Railway Co. (NYSE:CNI) missed expectations when it reported its third quarter results on Tuesday – after extraordinary items are taken into account – and the stock was reflecting this disappointment on Wednesday.

In Toronto, the shares were down in late-morning trading, although they have rebounded nearly 40% since early March on hopes that the North American economy is turning around.

Here’s what analysts are saying about the stock.

Randy Cousins, BMO Nesbitt Burns: “Normally we would argue that a railroad is only as good as the customers on its rail line. CNR has demonstrated an ability to manage around difficult customer conditions (forest products and automobiles/Ontario).” He rates the stock with a “market perform” recommendation and a price target of $65.

Benoit Poirier, Desjardins Securities: “We maintain a cautious outlook for the rail sector, as shock absorbers are becoming headwinds, but we are very pleased with CN’s financial position and strong free cash flow generation. We continue to believe the stock is fairly valued at current levels. Hence, we are not yet prepared to adopt a more bullish stance on CN, as the company’s valuation remains relatively rich versus its historical range.” He rates the stock with a “hold” recommendation and a price target of $58.

Steve Hansen, Raymond James: “CN’s latest results underscore what we believe is likely to become an enduring theme, namely: operating leverage. The recent downturn has not been pleasant, to say the least, but it has clearly forced CN to aggressively manage both fixed and variable costs. Indeed, the company’s ability to post record operating metrics in the face of sharply lower volumes we believe is a testament to management’s operating prowess and ability to adapt.” He rates the stock with an “outperform” recommendation, but raised his target price to $64.50 from $60.

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Tagged: , Railroads, Canada
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