Issue 43 – Canadian National Railway Strong as Nails

Earnings season is back at the forefront and one of the Canadian bellwether stocks reported on Tuesday night. Canadian National Railway (TSX: CNR) reported in-line 3Q 2019 results which were driven by cost cutting and lower taxes. However, they are reducing their guidance from low double digit to high single digit EPS growth. The company is being proactive and has started to put locomotives and railcars into storage and reducing their headcount in the markets where they are seeing some softness in volumes. This is why CNR has one of the best operating metrics in the industry. Management definitely has the tools and the expertise to move quickly and efficiently. I’m very pleased to see how quickly and proactively the company is acting ahead of anticipated slower growth. It seems that the long-term vision of the company is intact as they maintained their capex guidance for 2019. CNR seems committed to continue investing in capacity, efficiency, and long-term projects. However, the company is also being prudent as they pushed their 2020 budget to December to have better visibility.

Disclaimer: Palos Funds are shareholders of CNR.


By Charles Marleau, CIM & Joany Pagé, CFA

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