Evercore ISI Upgrades Canadian National Railway (CNI) to Outperform
Evercore ISI analyst Jonathan Chappell upgraded Canadian National Railway (NYSE: CNI) from In Line to Outperform with a price target of $124.00 (from $108.00).
The analyst commented: "For the first time in nearly 3 years, it appears that CNI is set up for a material beat & raise heading into 2Q earnings. The guidance ranges for this year always seemed conservative (flat RTM growth, low-single-digit EPS growth), but now with 6 months in hand and positive volume momentum continuing through 2Q, we not only see the potential for a material 2Q beat (our new estimate of C$2.00 compares to the average Street forecast of C$1.91), but we now believe CNI can raise its RTM and EPS growth targets for the year. Like most rails (see below), fuel surcharge tailwinds will help drive 2Q revenue upside, while limited expense increases amid the better volume backdrop will aid margin expansion, but the biggest surprise is coming from RTM growth that is tracking near 4.5%, versus earlier expectations of <1% for the period. Grain was supposed to be strong, but Petrochemical & Chemicals and Autos have improved materially through 2Q, with a favorable exit rate pointing to ongoing mid-single-digit volume expansion through at least 3Q. Although CNI has narrowed some of the multi-year underperformance in the shares as weekly volumes have inflected, a beat and raise, with line of sight to continued EPS growth momentum, should help further close the large multiple gap that emerged in 2024/25, and we believe the double catalyst of beat/raise and multiple expansion should enable CNI shares to continue to outperform the group over the coming months. "
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Shares of Canadian National Railway closed at $115.91 yesterday.