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MONTREAL - Canadian National Railway Company (TSX: CNR) (NYSE: CNI), known as CN, has reported record grain movements for March, surpassing previous monthly figures despite earlier setbacks due to harsh winter conditions. The rail operator successfully transported over 2.85 million metric tonnes of grain from Western Canada and achieved a national record of 2.98 million metric tonnes. With a market capitalization of $61.8 billion and impressive gross profit margins of 54.6%, CN continues to demonstrate its strength as a prominent player in the Ground Transportation industry. According to InvestingPro analysis, the company appears slightly undervalued based on its Fair Value calculations.
The increase in grain transportation comes after a challenging winter in Western Canada, where extreme cold prompted safety-related train length restrictions. CN’s Executive Vice-President and Chief Commercial Officer, Remi G. Lalonde, attributed the success to the concerted efforts of the company’s team and its collaboration with customers and partners across the supply chain. Despite operational challenges, CN maintains strong financial health metrics, as revealed by InvestingPro data, which shows the company generated $11.9 billion in revenue and $6 billion in EBITDA over the last twelve months.
Train length restrictions are a safety measure enforced during severe cold, as mandated by Transport Canada. With temperatures dropping below -25°C, CN had to operate shorter trains for a significant duration in January and early February, requiring additional resources to move goods.
Following the easing of weather conditions, CN has seen a return to regular traffic volumes and continues to work diligently to fulfill customer requirements. The grain supply chain’s capacity can reach up to 7,800 cars per week, translating to 744,000 metric tonnes outside of winter months, and up to 6,250 cars per week, or 595,000 metric tonnes, during winter. Achieving these levels is contingent on various factors, including smooth corridor flows, continuous operation at grain facilities, and the absence of major disruptions.
CN, a key player in North American transportation, operates a rail network of nearly 20,000 miles, connecting the east and west coasts of Canada with the U.S. Midwest and Gulf Coast. The company has been instrumental in promoting sustainable trade and community prosperity since 1919. InvestingPro analysis reveals CN’s strong dividend history, having raised dividends for 29 consecutive years with a current yield of 2.46%. Subscribers can access 12 additional ProTips and a comprehensive Pro Research Report, offering deep insights into CN’s financial health and growth prospects.
The information for this report is based on a press release statement from CN.
In other recent news, Canadian National Railway has been the focus of several analyst updates following its fourth-quarter earnings report. Stifel analysts raised the company’s price target to $125 from $120, maintaining a Buy rating. The firm noted the company’s potential for earnings growth despite recent disruptions. Similarly, Citi analysts increased the price target to $122 from $119, also keeping a Buy rating, even though the company’s adjusted earnings per share (EPS) of C$1.82 fell short of expectations. JPMorgan, however, reduced its price target to C$174, citing challenges such as labor and weather disruptions, but continued to recommend the stock with an Overweight rating.
Additionally, Canadian National Railway reached a tentative four-year collective agreement with the International Brotherhood of Electrical Workers, covering about 750 employees. This agreement, if ratified, is expected to ensure operational stability. Despite setbacks in the fourth quarter, analysts from Stifel upgraded the stock from Hold to Buy, with a revised price target of $120, highlighting potential growth in 2025. The company’s Q4 revenues are anticipated to decline by 2.3% to $4,370 million CAD, with a forecasted full-year 2024 operating ratio of 62.6%. Investors will be closely monitoring these developments and the company’s ability to meet its ambitious growth targets amid these challenges.
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