Here's Why Investors Should Hold Canadian National (CNI) Now
Canadian National Railway Company CNI is benefiting from investor-friendly steps and solid liquidity.
Factors Favoring CNI
We are impressed by CNI's efforts to reward its shareholders. To this end, the company's board approved a dividend hike of 8% in January. This marks its 27th annual dividend increase.
Despite the ongoing turbulence, its decision to hike dividend payment is encouraging. Canadian National’s ability to generate free cash flow supports shareholder-friendly activities. In 2022, it generated free cash flow to the tune of C$4,259 million compared with C$3,296 million in 2021. In the second quarter of 2023, CNI generated free cash flow of C$1,100 million compared with the year-ago quarter’s C$997 million.
Canadian National’s liquidity position is impressive. Its current ratio at second-quarter 2023 end was 0.93, higher than 0.74 reported in the first quarter of 2023. A rising current ratio implies that the company has enough liquid assets to cover its short-term liabilities.
Key Risks
Freight revenues (C$3,894 million), which contributed 95.9% to the top line, decreased 7% year over year in the second quarter of 2023. Freight revenues at the Petroleum and Chemicals, Forest products, and Intermodal segments tumbled 10%, 6%, and 26%, respectively. We predicted the metric to decline 7.2% year over year.
Zacks Rank & Key Picks
CNI currently carries Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the Zacks Transportation sector are GATX Corporation GATX and Kirby Corporation KEX.
GATX, which presently carries a Zacks Rank #2 (Buy), is aided by gradual improvement in the North American railcar leasing market. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For third-quarter and full-year 2023, GATX’s earnings are estimated to register 36.6% and 14.3% climb, respectively, on a year-over-year basis.
Kirby currently carries a Zacks Rank #2. Strong segmental performances are boosting Kirby’s top line.
For third-quarter and full-year 2023, KEX’s earnings are suggested to record 58.5% and 76.2% improvement, respectively, on a year-over-year basis.
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Canadian National Railway Company (CNI) : Free Stock Analysis Report
Kirby Corporation (KEX) : Free Stock Analysis Report
GATX Corporation (GATX) : Free Stock Analysis Report
