RBC Capital cuts Canadian National Railway shares target due to earnings shortfall By Investing.com

On Wednesday, RBC Capital took action on Canadian National Railway (TSX::CN) (NYSE: CNI) shares, adjusting its price target to Cdn$169.00 from the previous Cdn$172.00.

The adjustment comes in the wake of the company’s second-quarter earnings falling short of expectations. Canadian National Railway reported a Q2 result of $1.84 per share, which did not meet the consensus estimate of $1.93 per share.

The firm has chosen to keep a Sector Perform rating on the stock despite the reduced price target.

The second-quarter performance, coupled with the ongoing disruptions due to a possible labor strike, has led Canadian National Railway’s management to revise its earnings per share (EPS) growth forecast. The company now anticipates mid- to high-single-digit EPS growth, a step back from the previously projected 10%.

RBC Capital’s decision reflects the latest financial results and the company’s updated guidance. The analyst from RBC Capital noted, “This Q2 result, when combined with continued diversions associated with a potential strike, has prompted management to reduce its EPS growth guidance to mid- to high-single digit (from 10%).”

The stock may face some downward pressure due to these developments, as per the analyst’s expectations. The revised earnings outlook and the potential strike-related disruptions are key factors influencing RBC Capital’s stance on Canadian National Railway shares.

Investors are being informed of these changes as they may influence the stock’s performance in the market. The updated price target of Cdn$169.00 reflects RBC Capital’s current valuation of Canadian National Railway based on the presented financial figures and company forecasts.

In other recent news, Canadian National Railway (CN) has experienced several significant developments. Bernstein SocGen Group downgraded CN’s stock from Outperform to Market Perform due to concerns over near-term prospects, including cost pressures and below-consensus volume expectations for the second quarter. Additionally, the firm adjusted the price target to $130.67, a decrease from the prior target of $146.25.

In labor-related news, CN’s negotiations with the Teamsters Canada Rail Conference faced a setback when the offer to enter binding arbitration was rejected. The dispute centers around the modernization of the collective agreement, which CN asserts would enhance productivity and work-life balance for its employees.

On the financial front, despite a 1% dip in revenues due to lower fuel surcharge and RTMs, CN reported a steady operational performance for the first quarter. The company saw growth in petroleum, chemicals, frac sand, and metals segments, while experiencing declines in coal, grain, and forest products. Despite these challenges, CN reaffirmed its guidance for the year, projecting a 10% EPS growth in 2024.

In terms of subsidiary contracts, CN’s subsidiary CNTL ratified a four-year contract with owner-operators represented by Unifor, ensuring service continuity for trucking container deliveries across Canada until December 31, 2027. These are the recent developments that may influence CN’s operations and financial performance.

InvestingPro Insights

The recent assessment by RBC Capital on Canadian National Railway (NYSE: CNI) underscores the importance of closely monitoring a company’s financial health and market performance. In light of the company’s second-quarter earnings and the ongoing concerns over potential labor strikes, investors may find additional context in the real-time data and insights provided by InvestingPro. As of the last twelve months as of Q1 2024, Canadian National Railway holds an adjusted market cap of $75.83 billion, with a P/E ratio of 19.36, reflecting a market that values the company’s earnings at a premium.

InvestingPro Tips highlight that Canadian National Railway has a notable track record of raising its dividend for 29 consecutive years and boasts impressive gross profit margins of 55.78%. These factors, combined with the company’s status as a prominent player in the Ground Transportation industry, offer a glimpse into its financial stability and commitment to shareholder returns. However, with analysts revising their earnings downwards for the upcoming period and the stock trading at a high P/E ratio relative to near-term earnings growth, investors should consider both the strengths and potential areas of caution.

For those looking to delve deeper into Canadian National Railway’s prospects, InvestingPro offers additional tips and a comprehensive analysis that can further inform investment decisions. Interested readers can explore these insights and benefit from a special offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. With 19 additional tips available on InvestingPro, investors can equip themselves with an extensive array of data points and expert guidance to navigate the complexities of the stock market.

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