Argus Steps To Sideline On Canadian National, Waits For Revenue Growth Or $70 Level

Canadian National Railway (USA) CNI's revenue growth appears challenging over the next several quarters, according to Argus.

The Analyst

Argus analyst John Eade downgraded shares of Canadian National Railway from Buy to Hold.

The Thesis

Canadian National, though a well-managed firm with industry-high profitability, is likely to suffer from challenges to revenue growth over the next several quarters, as product mix skewed toward weaker categories such as autos, Eade said in a Friday morning note.

The railway's long-term shareholder return record is unimpressive relative to peers, the analyst said, despite the company buying back stock and recently raising its dividend by 10 percent.

The railroad operator recently reported results that were shy of estimates, Eade said. 

Better near-term opportunities are available in the rail sector, he said. 

"We will look to get the CNI shares back on the BUY list once we see signs of improved revenue growth or if the shares fall back to support near $70." 

The Price Action

Canadian National shares have gained about 7.5 percent over the past year.

Over the past three months, the shares have lost 4 percent versus a 5.4-percent advance by the S&P 500 Index.

Canadian National was trading down 1.21 percent at $75.93 midmorning Friday.

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