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Here's Why Canadian National Shares Are Up More Than 22% YTD

Shares of Canadian National Railway Company CNI have rallied more than 22% so far this year on the back of multiple tailwinds.


Let’s delve into the reasons.

The company is benefiting from robust freight demand. With freight revenues accounting for the bulk of its top line, high freight demand scores as a major positive for the company. Rail freight revenues rose 11.3% in the first quarter of 2019. Moreover, with substantial increase in freight revenues, the company’s bottom line improved in double digits on a year-over-year basis.

Additionally, each of the segments reported a rise in revenues during the first quarter. The Petroleum and Chemicals unit posted a massive surge of 30% in revenues. Meanwhile, the Metals and Minerals, Forest Products, Coal, Grain and Fertilizers, Intermodal and Automotive registered a rise of 9%, 8%, 15%, 7%, 4% and 7%, respectively.

Moreover, Canadian National’s buyout of The TransX Group of Companies in March boosted its supply chain and intermodal businesses across North America. The company’s efforts to improve rail infrastructure and expand its capacity further add to the air of positivity around the stock. To this end, capital expenditures are projected to be around C$3.9 billion in 2019. Bulk of the expenditures will be toward renewal of a more efficient and reliable locomotive fleet.

The company’s measures to reward shareholders through dividend payments and share buybacks are also noteworthy. It has raised dividends consecutively for more than 20 years. The latest hike was announced in January when the company’s board of directors approved an 18% increase in its quarterly cash dividend to C$0.5375 per share. Canadian National is also active on the buyback front. During the first quarter of 2019, the company bought back shares worth C$432 million.

Zacks Rank & Key Picks

Canadian National carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Air China Ltd. AIRYY, SkyWest, Inc. SKYW and GATX Corporation GATX. While Air China sports a Zacks Rank #1 (Strong Buy), SkyWest and GATX carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Air China and SkyWest have gained more than 7% and 33%, respectively, so far this year. Meanwhile, GATX flaunts an impressive earnings history, having trumped the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16%.

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