CEO Change At Canadian National: Recovery In The Cards?

In a bid to revive its sagging fortunes, railroad operator Canadian National Railway Company (NYSE:CNI) announced a change at its helm. Per the company, Jean-Jacques Ruest has replaced Luc Jobin as the chief executive officer (CEO) effective immediately. Notably, Jobin served as the company's CEO since July 2016.

Ruest has also been appointed as the president of the company. Prior to this latest announcement, Ruest served the company as its executive vice-president and chief marketing officer for eight years. In fact, he has been associated with Canadian National for 22 years now. A search for a permanent CEO at Canadian National is underway.

What Prompted the Change?

Of late, Canadian National has been struggling due to various headwinds. This is quite evident from its lackluster price performance. In the past six months, the stock has lost 8.2% of its value against the industry’s gain of 8.9%.

This Montreal, Canada-based company has been facing a number of challenges related to network congestion recently, which have hurt its operational performances. Unless resolved quickly, these operational issues might adversely impact its customer base, thus affecting company’s growth prospects. Increasing costs and the company’s high debt levels raise further concerns.

In fact, the above issues are well-reflected in Canadian National’s lower-than-expected earnings per share in the last two quarters. In February 2018, oilfield service major, Halliburton Company (NYSE:HAL) , stated that Canadian National’s service delays were also hurting the bottom line.

Given the plethora of issues facing Canadian National, it is not at all surprising that the company has decided to make a change at its helm. However, only time will tell whether the CEO replacement revitalizes the company and yields the desired results.

Guidance For 2018 Retained

Canadian National still expects adjusted earnings per share for the current year between C$5.25 and C$5.40. Moreover, the company, which focuses on improving safety and efficiency, intends to spend C$3.2 billion under its capital program in 2018.

Zacks Rank & Key Picks

Canadian National carries a Zacks Rank #3 (Hold). Better-ranked stocks in its industry include Norfolk Southern Corporation (NYSE:NSC) and Kansas City Southern (NYSE:KSU) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Norfolk Southern and Kansas City Southern have gained 15.4% and 17.5%, respectively, in a year’s time.

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