Canadian National R.R. (CNR.TO)

In the spotlight recently because trade wars and tariffs could impact the volumes being taken to the US by quite a bit. ROE tends to be more profitable than CP, but you're paying close to twice the price-to-book. Prefers CP, as its merger with Kansas City has opened up a whole new area.

He'd be looking south of the border instead.

Looks good fundamentally. Long-term chart shows an upward trend, and then it's gone sideways for the last couple of years. Average price of $156 for that sideways consolidation phase. These bigger, more predictable companies can go sideways for years. Not bad for dividends. For Canadian investors, almost a must-own stock.

Short-term trading range is about $148 to $174. We're closer to the lower level now. Not a bad time to buy. Expectations should be tempered to 10%, or $15, over the next year.

Wildfires and labour disruptions hurt volumes. Recent quarterly results show that's improved. Guidance cut. Part of an oligopoly. More economical than trucking. Rails will be a solid part of the economy forever. Compelling valuation, good chance to step in. Yield is 2.2%.

Goods consumption has slowed as consumer spending has slowed. Question marks about tariffs and importing goods. If the US administration gets tougher on tariffs from Mexico (where CNR isn't as active as CP), that could benefit CNR as we see more goods come through Canada.

He owns both CN and CP Rail and they are ones to hold for the long term. Rail is still the cheapest way of transportation. The stocks are cheap enough to offer double digit growth over the next five years.

Always issues with weather or strikes. Buying back stock at a very poor price, so he was not happy with capital allocation.

Attractive entry point, valuation is quite a discount to CP. Decreased earnings guidance due to general economy plus potential strike. Start building a position. Well positioned to take on additional capacity.

Rail is the most efficient way to ship freight. In this higher inflationary environment he'd prefer a rail such as CNR or CP. CP is his preference. Wide moat, massive cost advantages to choosing this method of transport, tough to replace.

His preference is CP, due to the recent acquisition of Kansas City; still has synergies to go, better offerings for customers. High barriers to entry. Just pulled back on earnings.

Cut to growth forecast is just a short-term thing. Over the long term, not too worried about the cyclicity of it. Prefers CP. 

Has fallen alot because of the sense that the economy is weakening, but rails have pricing power. Are higher operational expenses due to issues in Vancouver and are labour negotations. He sees these as short-term headwinds. Rails are a great, environmentally friendly business. There are only 5 major rail companies in North America, which is another plus.

It has had a choppy sideways market. It tried to break out but the strike issues haven't helped. Wait to buy at $150.

Recession-resistant business model. More conservative earnings growth outlook. Great long-term investment. Recent 10% price drop is a great time to average down or get in. Lagged peers in performance, but still strong free cashflow and better operating margins. Yield is 2.2%.

Last year, earnings increased 15% YOY despite revenue slump and economic uncertainty. Pullback is an opportunity. If all goes well, should see 10-15% EPS growth through to 2026. Ranks 9/10, with 16% price appreciation to $180.

Great business, likes rails. More environmentally friendly than trucking. Almost an oligopoly, can't build more rails. Falling because of a difficult commodity cycle, plus it's a cyclical in the face of slower economic growth. Worth buying at these levels. Executes well. Price competition with competitors no longer as cutthroat. 

CNR is now trading at 19X Forward P/E. In the 2Q, CNR’s revenue grew 7% to $4.33B, slightly missing the estimates of $4.38B and EPS of $1.84 missed estimates of $1.93. The operating results slightly missed expectations. The balance sheet has an OK net debt/EBITDA of 2.5x. The company continues to repurchase shares aggressively and pay healthy dividends. Overall, results missed expectations but management is still expected to compound diluted EPS in the range of 10%-15% over the 2024-2026 period along with a healthy ROIC. We think CNR’s long-term fundamentals remain intact.
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