On Friday, Stifel, a financial services firm, adjusted its outlook on Canadian National Railway (TSX:CNR) (NYSE:CNI), increasing the price target to $134 from the previous $121. The firm maintained a Hold rating on the stock, indicating a neutral stance on its investment potential despite acknowledging certain improvements in the company's operations.
The analysis by Stifel highlighted that Canadian National Railway's overall revenue ton miles (RTMs) showed a slight decrease of 0.3%. This decline was largely attributed to a significant 20.7% drop in coal shipments. Coal represents just under 10% of total RTMs for the company. The report noted that if coal shipments had remained constant year over year, RTMs would have seen an increase of 1.7%.
Furthermore, Stifel mentioned that intermodal volumes were up by 2.3%, yet this growth still trails behind that of Canadian National Railway's Class 1 peers. The report pointed out a notable reluctance of shippers to return to Prince Rupert, as evidenced by a 5.8% decrease in port volumes during January and February, compared to the same period last year.
Despite these mixed results, Stifel is not revising its $1.76 first-quarter earnings estimates for Canadian National Railway. However, the firm has slightly lowered its full-year projections for 2024 and 2025, now sitting below the company's own guidance of $8.01 CAD for the current year.
Stifel anticipates a compound annual growth rate (CAGR) of approximately 9% in earnings per share (EPS) through 2026. This projection is contingent on the normalization of volumes at Prince Rupert later in the year, which Stifel acknowledges as a potential risk.
The report concluded by addressing the stock's valuation, noting that with shares trading at over 22 times Stifel's 2024 EPS estimates and over 20 times the 2025 estimates—which are 4% below consensus—there seems to be limited potential for upside, supporting the firm's decision to maintain a Hold rating on Canadian National Railway shares.
InvestingPro Insights
As investors digest the analysis from Stifel on Canadian National Railway (NYSE:CNI), real-time data from InvestingPro provides additional context for assessing the company's stock. The InvestingPro data indicates a market capitalization of $82.89 billion and a P/E ratio of 20.56 based on the last twelve months as of Q4 2023. This valuation comes as the company exhibits a strong gross profit margin of 56.14% over the same period, underlining the efficiency of its operations despite the noted decrease in revenue growth.
Two notable "InvestingPro Tips" that may interest potential investors are that the management has been aggressively buying back shares and the company has raised its dividend for 28 consecutive years, with a dividend yield standing at 1.92% as of the latest data. These actions signal confidence from management in the company's financial health and a commitment to returning value to shareholders. Moreover, the stock's low price volatility and status as a prominent player in the Ground Transportation industry might appeal to investors looking for stable investments in this sector.
For those seeking to delve deeper into Canadian National Railway's financials and future prospects, additional "InvestingPro Tips" are available. There are 10 more tips listed in InvestingPro that could give further insights into the company's financial health and market position. To explore these tips and gain a more comprehensive understanding of CNI's investment potential, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.