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CNI Opens New Intermodal Facility

Zacks Equity Research

Canadian National Railway Company (CNI)), which operates the largest rail network in Canada has initiated operations at Calgary Logistics Park with the opening of a new intermodal terminal. The terminal is expected to meet the rising intermodal shipment requirements by increasing network fluidity as well as remain accretive to revenue growth.

Calgary Logistics Park, which is worth $200 million, primarily connects the ports of Prince Rupert and Vancouver and covers major cities in Canada and mid-America. Through the new intermodal service the park is now available for shipping consumer as well as industrial products. The new logistics facility includes a warehouse of 2.5 million square feet and a rail-to-truck transload facility alongside the autoport to facilitate finished vehicle shipments.  

Canadian National remains focused on improving rail infrastructural developments. The company expects investment of over $1 billion towards track and infrastructure improvement as well as productivity initiatives. The company aims to maintain high railroading (velocity, reliability, lowers costs and asset utilization) standards. As a result, it seeks productivity initiatives to reduce costs and leverage its assets.

Besides working on intermodal facilitates, the company expects to equip its locomotives with advanced technologies like Trip Optimizer and Wi-Tronix to increase fuel efficiency. Additionally, it is optimizing its coal trains and potash train cars to accommodate demand fluctuation.

We believe Canadian National‘s ability to transport incremental volume at a low cost provides it with greater operating leverage. In an effort to propel growth, the company seeks a 2–4 year capacity improvement plan. Moreover, in the near term, it also plans to acquire 2,200 new freight cars and 1,300 new containers to support volume growth and service levels.

However, competitive threats from its major rivals, including Canadian Pacific Railway Limited (CP), highly unionized workforce and regulatory pressures may impede growth at Canadian National.

The stock currently retains a Zacks Rank #3 (Hold). For the long term, we have a Neutral recommendation on Canadian National.

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