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Canadian National to Face Strike Action From Union on Nov 19

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Canadian National Railway Company (CNI - Free Report) received notice from Canada's Teamsters labor union representing more than 3000 conductors, trainpersons and yard workers in the company that it intends to begin strike actions starting Nov 19 following a stalemate in contract negotiations. This formal 72-hour notice of a likely strike was issued on Nov 16.

The union accused that this major Canadian railroad operator wants to make employees work for extended periods so that it becomes difficult for them to take time off. It also alleged that the company is asking the union to accept a lifetime cap on prescription drug coverage.

Meanwhile, Canadian National’s chief operating officer Rob Reilly stated that the company had offered the Teamsters Canadian Rail Conference a binding arbitration, which was declined by the union. Nevertheless, the company is “committed to constructive talks to reach an agreement without a work stoppage” and "if a settlement cannot be reached this weekend” it will “once again encourage the union leadership to accept binding arbitration as an alternative to disrupting the Canadian economy”.


Earlier in September, Canadian National’s 3000 conductors, trainpersons and yard workers voted in favor of strike action following the failure to reach a contract.

Weak Volumes Force Job Cuts

While struggling with declining freight volumes as a result of the U.S.-China trade tensions that have weakened the North American economy, Canadian National has decided to trim workforce, laying off 1600 employees in the United States and Canada, per The Globe and Mail reports. The Canadian newspaper also informed that the total number of workers to be laid off might rise if demand from rail customers falls further.

Amid this challenging environment, the company lowered its guidance for 2019. It now anticipates adjusted earnings per share to grow in high single-digit range compared with the previous expectation of a rise in the low double-digit band. Moreover, revenue ton miles (RTMs) are expected to witness slightly negative volume growth in the current year compared with the earlier prediction of a mid-single-digit volume expansion.

Zacks Rank & Key Picks

Canadian National carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Kansas City Southern (KSU - Free Report) , Allegiant Travel Company (ALGT - Free Report) and Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (VLRS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Kansas City Southern, Allegiant Travel and Controladora Vuela have soared more than 60%, 69% and 100%, respectively, so far this year.

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