Stephens raises Canadian National Railway stock target to $109

On Friday, Stephens analyst Justin Long increased the price target for Canadian National Railway (TSX:CNR) (NYSE:CNI) shares from $105.00 to $109.00, while maintaining an Equal Weight rating. Currently trading at $95.62, InvestingPro analysis suggests the stock is slightly undervalued. The revision follows Canadian National Railway’s first-quarter 2025 performance, which exceeded expectations set by Stephens’ financial model due to sustained growth in revenue per carload, with the company maintaining impressive gross profit margins of 54.63%.

The company confirmed its full-year guidance during the earnings call but expressed some caution regarding near-term volume predictions, deciding against providing further details on the short-term earnings trajectory. Despite the uncertainty and potential headwinds from less favorable foreign exchange rates than anticipated in the company’s forecast, Canadian National Railway is on track with its revenue ton-miles (RTM) guidance but at the lower end of the EPS growth projection. InvestingPro data reveals that 15 analysts have recently revised their earnings estimates downward for the upcoming period, while revenue growth is forecast at 5% for FY2025.

Management mentioned that while most of Canadian National Railway’s specific growth projects are advancing as planned, some could face delays due to the current macroeconomic landscape. The analyst also noted that direct routes from Mexico may present more challenges for the company compared to its competitors, given its network configuration.

After a swift recovery from early first-quarter unfavorable weather conditions, the company’s performance has been seen as a positive sign. However, with market consensus not showing significant movement, Stephens suggests that the stock is currently trading at a fair value. The updated price target reflects these considerations, setting it at $109, up from the previous target of $105.

In other recent news, Canadian National Railway reported first-quarter earnings that surpassed analyst expectations, with a 4% year-over-year increase in revenue. The Montreal-based company posted adjusted earnings per share of C$1.85, exceeding the analyst consensus of C$1.79. Revenue for the quarter reached C$4.4 billion, slightly above the estimated C$4.38 billion. The company’s operating ratio improved by 0.2 points to 63.4%, and revenue ton miles increased by 1% to 60,049 million. Despite these results, Canadian National Railway acknowledged potential risks due to a volatile macroeconomic and geopolitical environment. The company maintained its 2025 guidance, expecting adjusted diluted EPS growth of 10-15%, and outlined capital investments of approximately C$3.4 billion. Additionally, the company reiterated its 2024-2026 financial outlook, targeting high single-digit compounded annual adjusted diluted EPS growth. Canadian National Railway also noted a heightened recessionary risk related to tariffs and trade actions, which could impact its future outlook.

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