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On Friday, JPMorgan analyst Brian Ossenbeck adjusted the price target for Canadian National Railway (TSX:CNR:CN) (NYSE: CNI), reducing it to C$174.00 from the previous C$179.00, while continuing to recommend the stock with an Overweight rating. Currently trading at $105.20, near its 52-week low of $98.96, InvestingPro analysis suggests the stock is slightly undervalued. The company maintains impressive gross profit margins of 55% and boasts a GOOD financial health score. Ossenbeck highlighted that Canadian National Railway has dealt with a series of challenges throughout the year, including labor and weather disruptions, which have made it difficult for the company to meet its guidance. These issues persisted into the fourth quarter of 2024, leading to results that not only missed consensus expectations but did so by a larger margin than anticipated. This sentiment is reflected in InvestingPro data, showing 22 analysts revising their earnings expectations downward for the upcoming period. Despite challenges, the company has maintained its impressive 29-year streak of consecutive dividend payments.
The analyst noted that despite these setbacks, JPMorgan had upgraded Canadian National Railway in anticipation of 2025, expecting easier volume and operating comparisons, which would support the company’s earnings per share (EPS) growth target. Factors such as favorable foreign exchange rates and pension tailwinds were also mentioned as potential contributors to the company’s performance.
In his commentary, Ossenbeck acknowledged that Canadian National Railway’s fourth-quarter performance was expected to lag behind its peers, particularly after a strong start to the year. The market is currently assessing whether the company can avoid repeating last year’s challenges and maintain a sufficient buffer to manage future obstacles. With moderate revenue growth of 1.54% and a market capitalization of $66.1 billion, the company remains a prominent player in the ground transportation industry. For deeper insights into CNI’s valuation and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro, which includes additional financial metrics and expert analysis.
Ossenbeck expressed confidence in the original investment thesis for Canadian National Railway, stating that he sees less downside risk compared to peers. He also pointed out that the company’s management did not begin the year by lowering expectations, which could be seen as a positive sign. Despite the revised price target, the Overweight rating indicates that JPMorgan still views Canadian National Railway as a favorable investment relative to other stocks in the sector.
In other recent news, Canadian National Railway (CN) has been the focus of significant developments. The company announced a tentative four-year collective agreement with the International Brotherhood of Electric Workers (IBEW), a crucial step in ensuring the continuity of CN’s operations and services. In addition, CN has also reached a new labor agreement with Unifor, further strengthening its operational stability.
CN’s recent financial performance has shown resilience despite challenges. The company reported a 2% increase in earnings per share year-over-year, reaching $1.72 in the third quarter of 2024. Revenue also increased by 3%, 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.
Several analysts have upgraded CN’s stock recently. Stifel upgraded the stock 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. These are recent developments, and investors are advised to conduct their due diligence before making any investment decisions.
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