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    CNR   CA1363751027

CANADIAN NATIONAL RAILWAY COMPANY

(CNR)
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Delayed Toronto Stock Exchange  -  05/20 04:00:00 pm EDT
143.24 CAD   +0.80%
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North American railroad operators to lay bare volumes slump

01/19/2022 | 03:17pm EDT
FILE PHOTO: A Union Pacific rail car is parked at a Burlington Northern Santa Fe (BNSF) train yard in Seattle

(Reuters) - North American railroad operators are expected to reveal a dour picture when they report fourth-quarter results as lower freight volumes due to port congestion, labor shortages and adverse weather dampen gains from higher shipment prices.

The COVID-19 pandemic knocked volumes shipped, but the companies were able to offset some of that impact by raising prices. That may not be enough to sustain profit growth anymore, analysts say.

"The key to the rails' show-me story remains volume growth, since revenues must carry the load as more than a decade of profit growth led by pricing and PSR (Precision Scheduled Railroading) reaches maturity," Susquehanna Financial Group analyst Bascome Majors said.

Still, analysts see light at the end of the tunnel. Volumes are widely expected to pick up this year, with the bulk of the growth in the second half.

"We expect volume growth to reaccelerate in H2/22, as supply-chain performance and semiconductor supply improve, a new Canadian grain harvest approaches, and the prior-year comparables become easy again," brokerage TD Securities said.

(Graphic: Railway stock performance, https://fingfx.thomsonreuters.com/gfx/buzz/zgvomaddrvd/MicrosoftTeams-image%20(7).png)

THE CONTEXT

With the highly-infectious Omicron variant potentially delaying a recovery in global supply chains, investors will be closely watching commentary from Class I railroads when Union Pacific Corp kicks off earnings on Thursday.

Canadian National Railway Co, Canadian Pacific Railway Ltd and Norfolk Southern Corp are scheduled to report next week.

The focus will be on intermodal freight and automotive shipments, high-margin businesses that suffered in 2021 due to the global chip shortage and logjams at ports.


Graphic: Union Pacific, Canadian National: Revenue in the past three qtrs,

THE FUNDAMENTALS

** Union Pacific is set to report fourth-quarter revenue of $5.61 billion on Jan. 20 and a profit of $2.64 per share, according to Refinitiv data. In the year-ago quarter, the company posted a profit of $2.05 per share.

** Canadian National is expected to report a fourth-quarter revenue of C$3.7 billion ($2.96 billion) on Jan. 25 and a profit of C$1.55 per share, compared to a profit of C$1.43 per share a year earlier.

WALL STREET SENTIMENT

** The current average analyst rating on Union Pacific shares is "buy", with six analysts rating it "hold", and 24 "buy" or higher. Wall Street's current median 12-month price target is $270.00

** The current average analyst rating on Canadian National shares is "hold", with 16 analysts rating it "hold", and six "buy" or higher. Wall Street's current median 12-month price target is C$159.50

($1 = 1.2509 Canadian dollars)

(Reporting by Nathan Gomes in Bengaluru; Additional reporting by Shivansh Tiwary; Editing by Sriraj Kalluvila)

By Abhijith Ganapavaram and Nathan Gomes


© Reuters 2022
Stocks mentioned in the article
ChangeLast1st jan.
AUSTRALIAN DOLLAR / CANADIAN DOLLAR (AUD/CAD) -0.05% 0.90219 Delayed Quote.-1.51%
BRITISH POUND / CANADIAN DOLLAR (GBP/CAD) 0.38% 1.6036 Delayed Quote.-6.56%
CANADIAN DOLLAR / JAPANESE YEN (CAD/JPY) -0.16% 99.562 Delayed Quote.9.51%
CANADIAN DOLLAR / SWISS FRANC (CAD/CHF) -0.01% 0.75824 Delayed Quote.5.01%
CANADIAN NATIONAL RAILWAY COMPANY 0.80% 143.24 Delayed Quote.-7.81%
CANADIAN PACIFIC RAILWAY LIMITED 0.41% 88.34 Delayed Quote.-2.90%
CORN FUTURES (C) - CBR (FLOOR)/C1 -4.52% 781.25 End-of-day quote.31.69%
CSX CORPORATION 0.00% 30.94 Delayed Quote.-17.71%
NEW ZEALAND DOLLAR / CANADIAN DOLLAR (NZD/CAD) 0.57% 0.82251 Delayed Quote.-5.34%
NORFOLK SOUTHERN CORPORATION 0.36% 228.86 Delayed Quote.-23.41%
ON SEMICONDUCTOR CORPORATION 0.70% 56.46 Delayed Quote.-16.87%
S&P GSCI GRAINS INDEX -1.10% 706.6621 Real-time Quote.37.51%
WHEAT FUTURES (W) - CBR (FLOOR)/C1 12.81% 1177.5 End-of-day quote.52.77%
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Financials
Sales 2022 15 981 M 12 448 M 12 448 M
Net income 2022 4 748 M 3 698 M 3 698 M
Net Debt 2022 14 257 M 11 104 M 11 104 M
P/E ratio 2022 20,7x
Yield 2022 2,01%
Capitalization 99 007 M 77 118 M 77 118 M
EV / Sales 2022 7,09x
EV / Sales 2023 6,66x
Nbr of Employees 22 953
Free-Float 99,5%
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Number of Analysts 31
Last Close Price 143,24 CAD
Average target price 166,06 CAD
Spread / Average Target 15,9%
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Managers and Directors
Tracy A. Robinson President, Chief Executive Officer & Director
Ghislain Houle Chief Financial Officer & Executive Vice President
Robert L. Pace Chairman
Dominique Malenfant EVP, Chief Information & Technology Officer
Nayan Bharadwa Assistant Vice President-Operational Technology