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Here's Why Investors Should Retain Canadian National (CNI)
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Canadian National’s (CNI - Free Report) dedication to rewarding shareholders through dividends and buybacks showcases its financial robustness. Despite benefiting from solid pricing, low costs and strong liquidity, the company faces challenges, such as supply-chain disruptions, network fluidity issues and a weak intermodal scenario, impacting its performance.
Factors Favoring CNI
CNI impressively increased its quarterly dividend by 7% in January. This is the 28th consecutive year when the company announced a dividend hike. Management also announced a normal course issuer bid for up to 32 million common shares, effective from Feb 1, 2024 to Jan 31, 2025. Despite the ongoing turbulence, the decision to raise dividends is encouraging, supported by its strong free cash flow, reaching C$3,887 million in 2023.
In the full-year 2023, operating expenses decreased by 2% year over year, attributed to lower fuel prices. Favorable factors included freight rate increases, the translation impact of a weaker Canadian dollar and a higher average headcount.
Key Risks
Supply-chain disruptions, network issues and weak intermodal conditions are hindering the company’s performance. The Intermodal segment’s revenues fell 20% in the fourth quarter of 2023 due to lower revenue ton miles and carloads, dropping 8% and 6%, respectively.
In the fourth quarter of 2023, freight revenues totaled C$4,303 million, contributing 96.2% to the top line, with a 2% year-over-year decline. Freight revenues from the Petroleum and Chemicals, Metals and Minerals, Coal, Grain and Fertilizers and Automotive segments increased by 8%, 1%, 6%, 4%, and 19%, respectively. The Forest Products and Intermodal segments also experienced growth, up 6% and 20%, respectively.
By the end of the fourth quarter of 2023, CNI's current ratio (a measure of liquidity) stood at 0.61, signaling a concerning situation as it indicates current liabilities surpassing current assets, potentially leading to challenges in meeting short-term obligations.
AL has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 20.15%. AL currently carries Zacks Rank #2 (Buy). Continuous fleet growth and increased sales activity are boosting Air Lease's revenues.
The Zacks Consensus Estimate for 2024 earnings has been revised 26.04% upward over the past 90 days. The company has an expected earnings growth rate of 30% for 2024. Shares of AL have rallied 31.6% in the past year.
SkyWest's fleet modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26% over the past 90 days. Shares of SkyWest have surged 211% in the past year.
SKYW has an expected earnings growth rate of more than 100% for 2024. The company delivered a trailing four-quarter earnings surprise of 128.02%, on average.
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Here's Why Investors Should Retain Canadian National (CNI)
Canadian National’s (CNI - Free Report) dedication to rewarding shareholders through dividends and buybacks showcases its financial robustness. Despite benefiting from solid pricing, low costs and strong liquidity, the company faces challenges, such as supply-chain disruptions, network fluidity issues and a weak intermodal scenario, impacting its performance.
Factors Favoring CNI
CNI impressively increased its quarterly dividend by 7% in January. This is the 28th consecutive year when the company announced a dividend hike. Management also announced a normal course issuer bid for up to 32 million common shares, effective from Feb 1, 2024 to Jan 31, 2025. Despite the ongoing turbulence, the decision to raise dividends is encouraging, supported by its strong free cash flow, reaching C$3,887 million in 2023.
In the full-year 2023, operating expenses decreased by 2% year over year, attributed to lower fuel prices. Favorable factors included freight rate increases, the translation impact of a weaker Canadian dollar and a higher average headcount.
Key Risks
Supply-chain disruptions, network issues and weak intermodal conditions are hindering the company’s performance. The Intermodal segment’s revenues fell 20% in the fourth quarter of 2023 due to lower revenue ton miles and carloads, dropping 8% and 6%, respectively.
In the fourth quarter of 2023, freight revenues totaled C$4,303 million, contributing 96.2% to the top line, with a 2% year-over-year decline. Freight revenues from the Petroleum and Chemicals, Metals and Minerals, Coal, Grain and Fertilizers and Automotive segments increased by 8%, 1%, 6%, 4%, and 19%, respectively. The Forest Products and Intermodal segments also experienced growth, up 6% and 20%, respectively.
By the end of the fourth quarter of 2023, CNI's current ratio (a measure of liquidity) stood at 0.61, signaling a concerning situation as it indicates current liabilities surpassing current assets, potentially leading to challenges in meeting short-term obligations.
Zacks Rank
CNI currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Investors interested in the broader Transportation sector may consider stocks like Air Lease (AL - Free Report) and SkyWest (SKYW - Free Report) . SKYW sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
AL has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 20.15%. AL currently carries Zacks Rank #2 (Buy). Continuous fleet growth and increased sales activity are boosting Air Lease's revenues.
The Zacks Consensus Estimate for 2024 earnings has been revised 26.04% upward over the past 90 days. The company has an expected earnings growth rate of 30% for 2024. Shares of AL have rallied 31.6% in the past year.
SkyWest's fleet modernization efforts are commendable. The Zacks Consensus Estimate for SKYW’s 2024 earnings has improved 26% over the past 90 days. Shares of SkyWest have surged 211% in the past year.
SKYW has an expected earnings growth rate of more than 100% for 2024. The company delivered a trailing four-quarter earnings surprise of 128.02%, on average.