Canadian National R.R. (CNR-T)

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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Best in class business with excellent prospects. Assets very hard to replicate. Strong management team. Safe earnings that are very consistent. Business that is an essential service, that carries goods across the country. 

TFII is up 17% YTD, so not much of a pullback. On a YTD basis, outperforming the railroads. He likes both those businesses. Canada has good geography for trucking and infrastructure. 

CNR is the laggard. CP is doing nicely. He still regrets not switching from CNR to CP. 

It's traded in a lovely, rising range the past 10 years, but is now falling to the bottom of that channel. He'd hold on.

Economic indicator. As the economy weakens, particularly in Canada, stocks come down. Stocks are forward looking, so this is a view of the next 12-24 months. Can be a core holding. May drift lower. Around $160 a good place to start accumulating; won't shoot up, so you can take your time. Over time, most likely will continue to appreciate.

Shares weak recently, but shipment volumes should rise as inflation eases. Labour negotiations right now. Leading indicator of the economy, and management seeing economic improvements. Strong fundamentals, profitability good, strong balance sheet. He'd buy more on weakness. Nice dividend yield of 2%.