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Canadian National Trims FY24 EPS Growth View Post Labor Crisis
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Canadian National Railway Company (CNI - Free Report) adjusted the outlook for the current year following labor disruptions that threatened to cripple the economy of Canada. The railroad operator has, however, resumed normal operations following the crisis. All essential parameters, including car velocity, train speed and dwell, have recovered following the labor stoppage. Apart from labor woes, Alberta wildfires and weaker-than-expected demand for forest products and metals compelled CNI’s management to adjust its 2024 outlook.
Primarily due to the labor dispute, CNI shares have declined 6% in the past three months, underperforming its industry’s 6.9% growth.
Image Source: Zacks Investment Research
Revised Outlook for CNI
Canadian National now expects adjusted EPS to grow in the low single-digit range, compared to its previous expectation of mid to high single-digit growth. Capital expenditures (net of amounts reimbursed by customers) for the current year are still expected to be C$3.5 billion. The railroad operator now expects adjusted return on invested capital for the current year to be in the 13-15% range, compared to the previous expectation of roughly 15%.
Following the railroad operator‘s decision to cut the 2024 EPS growth outlook and the weak economic environment, CNI withdrew its previously provided guidance for the 2024-2026 time period. CNI targets compounded annual adjusted EPS growth in the high single-digit range.
A Look Back at the Labor Dispute
The dispute was regarding multiple topics including higher pay, scheduling and worker fatigue. Apart from CNI, operations at another Canadian railroad operator, Canadian Pacific Kansas City (CP - Free Report) , were affected by the work stoppage. Unionized employees of CP and CNI resorted to lockout on Aug. 22 after an agreement with the union — Teamsters Canada Railway Conference (“TCRC”) — could not be reached in nine months of negotiations and the deadline passed. The total number of locked-out workers was nearly 10,000.
Finally, workers of CNI and CP resumed operations after Canada’s Labor Minister, Steven MacKinnon, stepped in and referred the labor dispute for binding arbitration. A prolonged work stoppage by CP and CNI and the resultant shutdown of services would have hurt not only the U.S. cross-border trade but global supply chains significantly since two-thirds of Canada’s GDP is accounted for by international trade.
Zacks Rank
Both CNI and CP stocks currently carry a Zacks Rank #3 (Hold).
CHRW, which is being well-served by its cost-reduction efforts, has an expected earnings growth rate of 25.5% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, delivering an average surprise of 7.3%. Shares of CHRW have gained 19.2% in the last three months.
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Canadian National Trims FY24 EPS Growth View Post Labor Crisis
Canadian National Railway Company (CNI - Free Report) adjusted the outlook for the current year following labor disruptions that threatened to cripple the economy of Canada. The railroad operator has, however, resumed normal operations following the crisis. All essential parameters, including car velocity, train speed and dwell, have recovered following the labor stoppage. Apart from labor woes, Alberta wildfires and weaker-than-expected demand for forest products and metals compelled CNI’s management to adjust its 2024 outlook.
Primarily due to the labor dispute, CNI shares have declined 6% in the past three months, underperforming its industry’s 6.9% growth.
Revised Outlook for CNI
Canadian National now expects adjusted EPS to grow in the low single-digit range, compared to its previous expectation of mid to high single-digit growth. Capital expenditures (net of amounts reimbursed by customers) for the current year are still expected to be C$3.5 billion. The railroad operator now expects adjusted return on invested capital for the current year to be in the 13-15% range, compared to the previous expectation of roughly 15%.
Following the railroad operator‘s decision to cut the 2024 EPS growth outlook and the weak economic environment, CNI withdrew its previously provided guidance for the 2024-2026 time period. CNI targets compounded annual adjusted EPS growth in the high single-digit range.
A Look Back at the Labor Dispute
The dispute was regarding multiple topics including higher pay, scheduling and worker fatigue. Apart from CNI, operations at another Canadian railroad operator, Canadian Pacific Kansas City (CP - Free Report) , were affected by the work stoppage. Unionized employees of CP and CNI resorted to lockout on Aug. 22 after an agreement with the union — Teamsters Canada Railway Conference (“TCRC”) — could not be reached in nine months of negotiations and the deadline passed. The total number of locked-out workers was nearly 10,000.
Finally, workers of CNI and CP resumed operations after Canada’s Labor Minister, Steven MacKinnon, stepped in and referred the labor dispute for binding arbitration. A prolonged work stoppage by CP and CNI and the resultant shutdown of services would have hurt not only the U.S. cross-border trade but global supply chains significantly since two-thirds of Canada’s GDP is accounted for by international trade.
Zacks Rank
Both CNI and CP stocks currently carry a Zacks Rank #3 (Hold).
A better-ranked stock in the Zacks Transportation sector is C.H. Robinson Worldwide (CHRW - Free Report) , currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
CHRW, which is being well-served by its cost-reduction efforts, has an expected earnings growth rate of 25.5% for the current year.
The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed the mark once, delivering an average surprise of 7.3%. Shares of CHRW have gained 19.2% in the last three months.