CNI to Expand Railway Capacity

Canadian National Railway Company ( CNI - Analyst Report ) recently announced that it will build five extended sidings on its B.C. (British Columbia) North Line this year to serve the ever growing traffic in its B.C. North corridor.

The proposed construction of five extended sidings, which is a part of the company’s multi-year capital program, will increase the capacities of these trains, thus supporting more volumes across Edmonton, Alberta (Alta)-Prince Rupert, and the B.C. corridor.

Since 2004, Canadian National has extended or constructed 21 sidings to transport 12,000-foot trains between Edmonton and Prince Rupert. The new sidings are in addition to the new signaling and train control, several tunnel and bridge clearances, yard expansions at Smithers and Terrace, B.C., and the construction of a longer siding at Swan Landing, Alta.

Canadian National aims to maintain high railroading (velocity, reliability, lowers costs and asset utilization) standards. In addition, Canadian National is continuously seeking productivity initiatives to reduce costs and leverage its assets.

For this purpose, the company targets to spend C$1.8 billion this year, of which over $1 billion will be directed toward track and infrastructure improvement as well as productivity initiatives. Approximately C$150 million is allotted toward acquisition of new freight cars and upgrading locomotives along the Edmonton-Prince Rupert corridor and around C$500 million has been dedicated toward information technology and various new projects.

The first quarter 2012 earnings surpassed the Zacks Consensus Estimate and improved from the year-ago level on strong pricing. Despite the slowing economy and stiff competition from Canadian Pacific Railway ( CP - Analyst Report ) , we expect the company to benefit from strong growth across all its segments on favorable demand/supply dynamics. We, thus, maintain our long-term Neutral recommendation for Canadian National Railway Company.

Currently, it has a Zacks #3 Rank, implying a short-term Hold rating on the stock.

Based in Montreal, Canada, Canadian National Railway Company is engaged in the rail and related transportation business. Canadian National Railway operates the largest rail network in Canada and the only transcontinental network in North America.