July 9th 2010
(CNI) Canadian National Railway Analyst Initiates Coverage at Neutral
We are initiating coverage on Canadian National Railway (CNI) with a Neutral recommendation and a Zacks #3 (Hold) Rank. We believe increased traffic, solid execution, significant increase in industrial production, ongoing inventory replenishment and a sharp rebound in many of the company’s end markets will fuel growth going forward, due to a sustainable improvement in the economy.
Canadian National consistently leads the Class I railroads relative to several key financial metrics. The company has the industry best operating ratio, free cash generation, return on equity and return on invested capital. The company expects solid double-digit earnings growth for 2010, with carload growth in the low double digits and pricing improvement of about 3.5%. It expects a sustainable operating ratio in the mid-60s over the next few years, given a stronger volume growth at low cost with productivity initiatives such as improving system velocity and fuel efficiency.
Canadian National is expanding its business and investing in certain capital programs, which will allow it to operate efficiently and effectively. T