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On Friday, Citi analyst Ariel Rosa updated Canadian National Railway (TSX:CNR) ’s (NYSE:CNI) price target to $122 from the previous $119 while reaffirming a Buy rating for the company’s shares. This adjustment follows the railway’s fourth-quarter earnings report for 2024, which revealed an adjusted earnings per share (EPS) of C$1.82. This figure fell short of both Citi’s and the broader market’s expectations, which were set at $1.94 and $1.92, respectively. According to InvestingPro data, CNI, currently valued at $66.1 billion by market cap, appears slightly undervalued based on their proprietary Fair Value model.
Canadian National Railway’s stock experienced a modest decline of 1% in after-hours trading. The dip came in response to the company’s forward-looking guidance for 2025, which was either aligned with or slightly below market projections. The company has projected an adjusted EPS growth of 10% to 15% year-over-year for 2025, centering around a 12.5% midpoint which is slightly below Citi’s previous estimate of 13%. Notably, CNI maintains an impressive track record of 29 consecutive years of dividend increases, with a current yield of 2.27%.
The company’s guidance for volume growth in 2025 was also released, indicating expectations of low to mid-single-digit percentage growth for revenue ton-miles (RTMs). This forecast is generally consistent with, or somewhat below, Citi’s anticipation of a 3.7% increase. The fourth-quarter results highlighted a challenging period for Canadian National Railway, impacted by severe winter conditions and labor disruptions that contributed to increased dwell times and a higher operating ratio.
Despite the setbacks faced in the fourth quarter of 2024, Citi maintains a positive outlook for Canadian National Railway going into 2025. The analyst noted that with the adverse weather and labor issues now in the past, the railway company is well-positioned for potential growth in the coming year. This optimism is supported by the comparative ease of surpassing the previous year’s performance and what is considered an attractive valuation of the company’s shares. InvestingPro analysis reveals strong fundamentals with an impressive 54.63% gross profit margin and robust financial health metrics. For deeper insights into CNI’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Canadian National Railway (CN) has experienced significant developments. The company’s earnings per share increased by 2% year-over-year, reaching $1.72 in the third quarter of 2024, despite facing various challenges. Revenue also saw a 3% increase, driven by long-haul intermodal and refined petroleum products. However, Q4 revenues are expected to fall by 2.3% to $4,370m CAD due to disruptions.
CN has also successfully reached a new labor agreement with Unifor and a tentative four-year collective agreement with the International Brotherhood of Electric Workers (IBEW). These agreements are expected to provide stability and support for CN’s continued commitment to safe and efficient transport services.
Several analysts have recently upgraded CN’s stock. Stifel changed its status from Hold to Buy, Jefferies raised its rating from Hold to Buy, Evercore ISI increased its rating to Outperform, and Citi upgraded the stock from Neutral to Buy. These upgrades reflect the potential for growth and an expectation of improved financial performance.
JPMorgan has also adjusted the price target for CN, reducing it to C$174.00 from the previous C$179.00, while continuing to recommend the stock with an Overweight rating. These are recent developments, and investors are advised to conduct their due diligence before making any investment decisions.
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