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Solid Grain Movement Amid Pandemic Aids Canadian National

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We recently issued an updated report on Canadian National Railway Company (CNI - Free Report) .

Like many other transportation companies, Canadian National is also hurting from the coronavirus pandemic.

Canadian National’s first-half 2020 revenues declined 10% year over year primarily due to COVID-19-induced network disruptions. Overall volumes declined 11% in the first half of 2020 due to double-digit declines in key segments like intermodal and automotive sectors. The company’s third-quarter performance is also likely to reflect substantial volume softness. Detailed results will be available on Oct 20.

Deterioration in operating ratio (operating expenses as a % of revenues) despite tepid revenues is concerning. This key metric has deteriorated to 70.4% in first-half 2020 from 63.2%in first-half 2019, mainly due to high operating expenses as revenues are weak.

However, performance of Canadian National with respect to grain transportation in March, April, May and June are impressive. Notably, the company moved 15 million metric tonnes (MMT) of Canadian grain in the first half of the year, thereby bettering its previous record of 13.9 MMT. Also, Canadian National set a record by moving 8.15MMT of Canadian grain during second-quarter 2020.

Zacks Rank & Stocks to Consider

Canadian National currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Transportation sector are Knight-Swift Transportation Holdings (KNX - Free Report) , United Parcel Service, Inc. (UPS - Free Report) and Werner Enterprises (WERN - Free Report) . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, UPS and Werner is pegged at 15%, 7.9% and 8.5%, respectively.

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