Canadian National (CNI) Declines 11% In 6 Months: Here's Why

Shares of Canadian National Railway Company (NYSE:CNI) have lost 11% in the past six months, significantly underperforming its industry’s gain of 6.1%.

Reasons Behind the Price Plunge

The company has been facing a number of challenges related to network congestion for the past few months, which have hurt its operational performance. Further, oilfield service major, Halliburton Company's (NYSE:HAL) statement issued in February 2018 that Canadian National’s service delays have been affecting its bottom line, underlines the gravity of this situation.

Additionally, rival Canadian Pacific Railway Limited’s (NYSE:CP) commentary about its increasing network fluidity highlights the fact that these operational issues might affect Canadian National’s customer base and adversely impact its growth prospects, unless resolved quickly.

In March 2018, Canadian National also announced a change at its helm to primarily address the service issues. The new CEO (interim) — Jean-Jacques Ruest — has apologized to its customers for the service woes and promised an improvement on the service front. However, in case the management change fails to yield the desired results, the stock might be hurt further.

Deterioration in operating ratio (defined as operating expenses as a percentage of revenues) due to high labor and fuel costs also does not bode well for the stock. Canadian National’s high debt levels raise concerns as well.

Furthermore, the stock has a VGM Score of C, which too highlights its unattractiveness. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores.

Such a score allows investors to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

Zacks Rank & Key Pick

Canadian National carries a Zacks Rank #3 (Hold). A better-ranked stock in the broader Zacks Transportation sector is FedEx Corporation (NYSE:FDX) , carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of FedEx have gained 14.5% over the last six months.

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