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Here's Why Investors May Bet on Canadian National (CNI) Now

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Canadian National Railway Company (CNI - Free Report) performed well in the past three-month period and has potential to sustain the momentum. If you haven’t taken advantage of its share price appreciation yet, it’s time you add the stock to your portfolio.

Let’s take a look at the factors that make the stock an attractive pick.

An Outperformer: A glimpse at the company’s price trend reveals that its shares have gained 15.2% in the past three-month period compared with 13.3% growth of the industry it belongs to.

Zacks Investment Research

Solid Rank: Canadian National currently carries a Zacks Rank #2 (Buy). Our research shows that stocks with a Zacks Rank #1 (Strong Buy) or 2 offer attractive investment opportunities.

Northward Estimate Revisions: Five estimates for 2023 have moved north in the past 60 days versus one southward revision, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2023 earnings has moved up marginally in the past 60 days.

Strong Growth Prospects: The Zacks Consensus Estimate for 2024 earnings is pegged at $5.92 per share, which indicates year-over-year growth of 11%. The company’s long-term expected earnings per share (EPS) growth rate is at 7.23%.

Driving Factors:  The company's efforts to reward its shareholders are impressive. To this end, CNI’s board approved a dividend hike of 8% in January 2023. This marks its 27th annual dividend increase.

CNI’s ability to generate free cash flow supports shareholder-friendly activities. In 2022, the company generated free cash flow to the tune of C$4,259 million compared with C$3,296 million in 2021. In the second quarter of 2023, Canadian National generated a free cash flow of C$1,100 million compared with the prior-year quarter’s C$997 million. It generated free cash flow of C$581 million during third-quarter 2023 compared with C$1,356 million a year ago.

During third-quarter 2023, operating expenses fell by 4% year over year to C$2,470 million due to lower fuel prices.  Positive impacts came from freight rate increases, favorable translation impact of a weaker Canadian dollar and higher export volumes of Canadian grain.

Other Key Picks

Investors interested in the Zacks Transportation sector may also consider other top-ranked stocks like Ryanair Holdings (RYAAY - Free Report) and SkyWest (SKYW - Free Report) , each currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

RYAAY is benefiting from buoyant air-traffic scenario post Covid. Traffic grew 11% to 105.4 million during the first half of fiscal 2024. On the back of robust traffic scenario, RYAAY’s profit after tax was €2.18 billion during the first half of fiscal 2024, up 59% year over year. Ryanair expects fiscal 2024 traffic to be183.5 million.

SKYW's fleet modernization efforts are commendable. Initiatives to reward its shareholders also bode well. The Zacks Consensus Estimate for 2024 earnings increased 3.5% in the past 60 days.

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