viewCanadian National Railway Company (CN)

Canadian railway companies downgraded to 'hold'

The industry’s volumes have been negatively affected by tough grain comparatives

Conditions are likely to improve a little in the current quarter

Canaccord Genuity has downgraded Canadian National Railway (TSE:CNR) to ‘hold’ from ‘buy’ ahead of the company’s third quarter results.

The broker’s projected one year investment return has slipped to a single digit percentage – 4.8%, including the dividend, which yields 1.6%.

It continues to expect solid growth from the railway, as the sector rebounds and the company benefits from self-help initiatives, but it reckons the expected growth is now priced in.

The company’s and the industry’s volumes have been negatively affected by tough grain comparatives, slowing crude-by-rail and other energy-related deliveries, lower coal shipments and slower intermodal growth due to the economy, the broker asserts.

Conditions are likely to improve in the coming quarter but not overly much, thanks to a number of end markets being subdued or uncertain.

The broker has trimmed its price target to C$83 from C$84.

Meanwhile, sector peer Canadian Pacific (TSE:CP) gets the same treatment, moving from ‘buy’ to ‘hold’, with the price target cut by C$5 to C$215.

The reasons for the downgrade are much the same as for Canadian National.

“We believe that CP has attractive growth opportunities over the longer term and that these may appeal to certain long-term investors: we currently expect low double-digit EPS growth over the long term from real GDP plus volume growth, inflation plus pricing, moderate operating improvements and share buybacks,” the broker said.


Quick facts: Canadian National Railway Company (CN)

Price: 120.82 CAD

Market: TSX
Market Cap: $85.76 billion

Add related topics to MyProactive

Create your account: sign up and get ahead on news and events


The Company is a publisher. You understand and agree that no content published on the Site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is...



archTIS poised for strong growth as they look at multiple sectors for technology

archTIS LTD (ASX: AR9) CEO and Executive Director Daniel Lai joined Steve Darling from Proactive to share his direction for the company as they look to branch out with their technology. Lai telling Proactive some of the contracts they have signed including their first in the Education/Space...

2 hours, 8 minutes ago

2 min read