Market Overview

Canaccord Cuts Canadian National Railway, Canadian Pacific

Share:
  • Shares of Canadian National Railway (USA) (NYSE: CNI) jumped 11 percent since September 14, while Canadian Pacific Railway Limited (USA) (NYSE: CP) shares are up 8 percent.
  • Canaccord Genuity’s David Tyerman downgraded the ratings on both the companies and reduced the rpice targets.
  • Tyerman said that while the companies had good long-term growth prospects, the current share prices already reflected the expectations.

Analyst David Tyerman mentioned that both the companies are expected to generate robust growth due to a rebound in industry growth, company-specific initiatives and share repurchases. He added, however, that the current share prices already discounts “most of the expected EPS gains over the next year.”

Canadian National Railway

Tyerman downgraded the rating on Canadian National Railway from Buy to Hold, citing a reduction in the one-year projected investment return to 4.8 percent, including a 1.6 percent dividend yield. The price target has been reduced from C$84 to C$83.

The analyst expects the company to record 11.2 percent EPS growth for Q315, backed by 0.8 percent revenue growth and a 3.1 percent improvement in its operating ratio to 55.3 percent.

In the report Canaccord Genuity noted, “Revenues are likely to be constrained by weak volumes (already reported), partially offset by benefits from the weak Canadian dollar (CAD).” Canadian National Railway is expected to report robust margins due to strong operating performance, along with lower fuel costs.

Canadian Pacific Railway

Tyerman downgraded the rating on Canadian Pacific Railway from Buy to Hold, citing a reduction in the one-year projected investment return to 6.4 percent, including a 0.7 percent dividend yield. The price target has been reduced from C$220 to C$215.

The analyst expects the company to report 17.1 percent EPS growth for Q315, driven by 0.8 percent revenue growth and a 3.4 percent improvement in its operating ratio to 59.4 percent.

“We expect limited revenue growth due to lower volumes (already reported) offset by price increases and benefits from the weak Canadian dollar (CAD),” the Canaccord Genuity report stated. Canadian Pacific Railway is likely to report strong margin expansion on account of lower fuel costs and ongoing cost controls.

Longer Term Prospects

Tyerman believes that both Canadian National Railway and Canadian Pacific Railway have “attractive growth opportunities over the longer term,” which may appeal to some long-term investors.

Latest Ratings for CNI

DateFirmActionFromTo
Apr 2019DesjardinsDowngradesBuyHold
Apr 2019CitigroupMaintainsBuyBuy
Jan 2019Credit SuisseUpgradesNeutralOutperform

View More Analyst Ratings for CNI
View the Latest Analyst Ratings

Posted-In: Canaccord Genuity David TyermanAnalyst Color Downgrades Price Target Analyst Ratings

 

Related Articles (CNI + CP)

View Comments and Join the Discussion!

Energous Corporation Receives First Utility and Design Patents for Its Over-the-Air Charging Solution

Raymond James Upgrades Northern Trust To Strong Buy, Likes Wealth Management And Global Custody