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Investing.com - Wells Fargo (NYSE:WFC) has lowered its price target on Canadian National Railway (TSX:CNR) (NYSE:CNI) stock to $117.00 from $120.00 while maintaining an Overweight rating. The stock, currently trading near its 52-week low of $91.65, has seen 16 analysts revise their earnings expectations downward according to InvestingPro data.
The firm cited several challenges facing the railway operator, including mix headwinds in the second quarter and increased fuel and casualty costs that hindered margin improvement. Despite these challenges, CNI maintains impressive gross profit margins of 54.79% and has demonstrated resilience with 29 consecutive years of dividend increases, as highlighted by InvestingPro. Wells Fargo noted that without carbon tax adjustments, which yielded a 60 basis point sequential and year-over-year operating ratio benefit, CNI’s core operating ratio would have deteriorated by approximately 10 basis points year-over-year.
Canadian National Railway has reduced its 2025 revenue ton mile (RTM) growth forecast to low single digits from low-to-mid single digits previously, as headwinds have emerged in forest products and international intermodal segments. The company’s third quarter has started with volumes down 6.5% year-over-year, creating a challenging path to achieving even the lowered growth targets.
The dismissal of Chief Marketing Officer Remi Lalonde and the reduction in long-term guidance have raised questions about CNI’s commercial strategy and execution capabilities, according to Wells Fargo. The firm also expressed concern about Canadian National’s competitive position amid potential U.S. rail mergers.
Wells Fargo has reduced its earnings per share estimates for Canadian National to C$7.40 for 2025 and C$8.00 for 2026, down from previous estimates of C$7.70 and C$8.45, respectively. These revisions reflect expectations for lower volumes in the second half of 2025 and more modest operating ratio improvements. According to InvestingPro’s Fair Value analysis, the stock currently appears undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of CNI among 1,400+ top stocks.
In other recent news, Canadian National Railway reported second-quarter earnings per share of C$1.87, which slightly exceeded the average Street estimate but fell short of some analysts’ projections, including Citi’s estimate of C$1.92. This performance was primarily attributed to lower-than-expected depreciation, amortization, and interest expenses. Citi maintained its Buy rating on the company but lowered its price target to $121, citing macroeconomic challenges. Evercore ISI downgraded Canadian National Railway from Outperform to In Line, reducing its price target to $105 due to concerns over softer-than-expected volumes affecting margin expansion. National Bank Financial also downgraded the stock from Outperform to Sector Perform, adjusting the price target to C$150, and expressed skepticism about significant stock movement in the near term. JPMorgan followed suit, downgrading the stock from Overweight to Neutral, with a price target reduction to C$154, citing ongoing disruptions impacting the company’s recovery efforts. Additionally, Canadian National Railway announced a quarterly dividend of C$0.8875 per share for the third quarter of 2025, payable on September 29, 2025. These developments reflect a mix of cautious analyst outlooks and ongoing shareholder returns.
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