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Canadian National's 2019 Earnings View Bleak Due to Strike

Zacks Equity Research

Canadian National Railway Company CNI lowered its outlook for 2019 earnings as the eight-day strike significantly affected operations, forcing it to run on a capacity of only 10%. Following this news, shares of the company declined 2% at the close of business on Dec 3.

Expecting the work stoppage to have dented earnings per share to the tune of C$0.15, Canadian National anticipates current-year adjusted earnings per share to grow in low to mid-single digits compared with the previous forecast of a rise in the high single-digit range. The company’s adjusted earnings were C$5.50 per share in 2018.

The eight-day industrial action at Canadian National began on Nov 19 with workers agitating over safety issues, working conditions including time to take a break and benefits.

Canadian National Railway Company Price

 

Canadian National Railway Company Price

Canadian National Railway Company price | Canadian National Railway Company Quote


Previous Earnings View Cut

Canadian National slashed its 2019 earnings view during the third-quarter 2019 earnings release as well due to fall in North American rail demand as a result of weak economy. Back then, the company had predicted adjusted earnings per share to grow in high single-digit range compared with a rise in the low double-digit band expected initially. Additionally, on account of sluggish economy, revenue ton miles (RTMs) are expected to witness slightly negative volume growth in the current year compared with the past estimate of a mid-single-digit volume expansion.

Struggling with declining freight volumes, thanks to the U.S.-China trade tensions that have weakened the North American economy, Canadian National had earlier (prior to the strike) decided to trim its workforce, laying off 1600 employees in the United States and Canada.

Zacks Rank & Key Picks

Canadian National carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the  broader Transportation sector are Kansas City Southern KSU, Allegiant Travel Company ALGT and Controladora Vuela Compania de Aviacion, S.A.B. de C.V. VLRS. While Allegiant sports a Zacks Rank #1 (Strong Buy), Kansas City Southern and Controladora Vuela carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Kansas City Southern, Allegiant Travel and Controladora Vuela have soared more than 56%, 68% and 90%, respectively, so far this year.

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