Canadian National Railway Misses On Revenue In 1Q

Canadian National Railway reported its first-quarter financial results on April 26 after market close. The operator of the largest rail network in Canada saw its traffic volume increase by 5% year-over-year.

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Canadian National Railway (CNR) revenue came in at C$3.54 billion in the first quarter of 2021, in line with the prior year. Revenue missed analysts’ estimates by C$2 million.

Meanwhile, diluted EPS was C$1.37 in 1Q 2021, a decrease of 4% from C$1.42 in 1Q 2020. On an adjusted basis, CN earned C$1.23 per share for the quarter, up 1% from C$1.22 last year. This number is on par with analysts’ estimates. The operating ratio improved to 62.5% in the first quarter.

The company updated its financial outlook for 2021 and is now targeting adjusted EPS growth in the double digits for the full year. (See Canadian National Railway stock analysis on TipRanks.)

Canadian National Railway’s President and CEO JJ Ruest said, “Industry-outpacing growth in our intermodal business, as well as our strong financial performance, position CN to be the premier railway of the 21st century: an engine of North American economic growth and prosperity and both an operational and sustainability leader. Gains in safety, train length, car velocity, labor productivity, fuel efficiency, and other key measures demonstrate our strong operational performance. Our proposal to combine with Kansas City Southern (KCS) will drive value to KCS and CN shareholders and significantly enhance customer choice and competition, while further reducing greenhouse gas emissions by converting truck to rail.”

Last week, National Bank analyst Cameron Doerkson maintained a Hold rating on the stock and lowered its price target from C$143.00 to C$147.00 (4.8% upside potential).

Doerkson stated that Canadian National Railway made a superior proposal than Canadian Pacific (CP) for KCS, “Our current expectation is that CP may match CN’s offer, after which we would expect CN to counter with an even higher offer. While we see the strategic rationale for CN to acquire KSU, we also believe CN is keen to keep CP from acquiring KSU as a CP-KSU combination would represent a greater competitive threat to CN, especially for north-south intermodal traffic.”

Overall, the consensus on the Street is that CN is a Moderate Buy based on 7 Buys and 14 Holds. The average analyst price target of C$147.01 implies an upside potential of about 7.8% to current levels.