We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Canadian National Stock Slips More Than 2% on Labor Row
Read MoreHide Full Article
Canadian National Railway Company (CNI - Free Report) is embroiled in a labor strife that involves more than 3000 conductors, trainpersons and yard workers, represented by Canada's Teamsters labor union. The employees agitating over safety issues, working conditions and benefits, have been staging walkouts since Nov 19 while the federal government is negotiating talks between the two parties for a mutual agreement. With this ongoing turbulence, shares of the company have dipped more than 2% since Nov 19.
Labor Conflict Amid Soft Freight Volumes
The labor dispute happens at a time when the company is already under significant pressure due to low freight volumes amid slowdown in the global economy. While trade-related uncertainty is affecting international intermodal volumes, weakness in the manufacturing sector is impacting domestic intermodal volumes.
In fact, declining North American rail demand forced the company to lower its 2019 earnings outlook. It now anticipates adjusted earnings per share to grow in high single-digit range compared with a rise in the low double-digit band expected previously. 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.
Transportation of freight, such as crops, potash, coal and manufactured goods to ports and the United States, is being affected significantly in Canada as the country depends heavily on Canadian National, its largest railroad operator, for these activities.
If the strike gets prolonged, the Canadian mining industry, accounting for more than half of annual rail freight revenues, is also likely to take a severe hit as it relies on Canadian National for the transportation of supplies. Per Pierre Gratton, president and CEO, Mining Association of Canada, "this strike will result in a severe reduction or elimination of railway capacity and will trigger the closure of mines with concurrent layoffs of thousands of employees beginning in a matter of days."
How Long Can the Strike Last?
According to Credit Suisse analysts, the work stoppage may have a short-term effect on Canadian National’s volumes but not a long-term impact on its earnings. Canadian ministers are striving to resolve issues between the company and Teamsters to avert the economic disruption at the earliest. Meanwhile, market watchers believe that the industrial action is not likely to persist for too long as rail strikes can have devastating consequences on the economy. Per TD Securities analyst Sean Steuart, “Rail strikes are normally short-lived, with either a fast negotiated resolution or back-to-work legislation enacted to prevent a significant impact on the economy”.
Shares of Kansas City Southern, Allegiant Travel and Controladora Vuela have soared more than 59%, 68% and 100%, respectively, so far this year.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Bigstock
Canadian National Stock Slips More Than 2% on Labor Row
Canadian National Railway Company (CNI - Free Report) is embroiled in a labor strife that involves more than 3000 conductors, trainpersons and yard workers, represented by Canada's Teamsters labor union. The employees agitating over safety issues, working conditions and benefits, have been staging walkouts since Nov 19 while the federal government is negotiating talks between the two parties for a mutual agreement. With this ongoing turbulence, shares of the company have dipped more than 2% since Nov 19.
Labor Conflict Amid Soft Freight Volumes
The labor dispute happens at a time when the company is already under significant pressure due to low freight volumes amid slowdown in the global economy. While trade-related uncertainty is affecting international intermodal volumes, weakness in the manufacturing sector is impacting domestic intermodal volumes.
In fact, declining North American rail demand forced the company to lower its 2019 earnings outlook. It now anticipates adjusted earnings per share to grow in high single-digit range compared with a rise in the low double-digit band expected previously. 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.
Canadian National Railway Company Price
Canadian National Railway Company price | Canadian National Railway Company Quote
Labor Dispute Weighs on the Canadian Economy
Transportation of freight, such as crops, potash, coal and manufactured goods to ports and the United States, is being affected significantly in Canada as the country depends heavily on Canadian National, its largest railroad operator, for these activities.
If the strike gets prolonged, the Canadian mining industry, accounting for more than half of annual rail freight revenues, is also likely to take a severe hit as it relies on Canadian National for the transportation of supplies. Per Pierre Gratton, president and CEO, Mining Association of Canada, "this strike will result in a severe reduction or elimination of railway capacity and will trigger the closure of mines with concurrent layoffs of thousands of employees beginning in a matter of days."
How Long Can the Strike Last?
According to Credit Suisse analysts, the work stoppage may have a short-term effect on Canadian National’s volumes but not a long-term impact on its earnings. Canadian ministers are striving to resolve issues between the company and Teamsters to avert the economic disruption at the earliest. Meanwhile, market watchers believe that the industrial action is not likely to persist for too long as rail strikes can have devastating consequences on the economy. Per TD Securities analyst Sean Steuart, “Rail strikes are normally short-lived, with either a fast negotiated resolution or back-to-work legislation enacted to prevent a significant impact on the economy”.
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 , 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 59%, 68% and 100%, respectively, so far this year.
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.5% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>