The current momentum in the crude oil industry is driving expansion plans for Canadian National Railway Company (CNI - Free Report) . The company is expected to ship more Alberta crude oil through LBC Tank Terminals’ facility located at Sunshine near Geismar, La.
The Sunshine facility, currently undergoing expansion will benefit Canadian National through its proximity with the two largest heavy crude refineries in Geismar. Moreover, it also has access to various pipelines and marine terminal facilities. The construction is expected to end by October this year and boost storage capacity to nearly three million barrels.
Canadian National’s plan to assign more services to LBC Tank Terminal remains consistent with its plan to tap opportunities in the northern Alberta crude oil region. Alberta is one of the strongest economic regions of Canada and among the largest producers of energy resources like crude oil (conventional and synthetic), natural gas and other gas products.
Some of the major oil fields like Brooks, Medicine Hat and Lethbridge are in Southeast Alberta. We believe that all these business opportunities bode well for any long-term investment made by rail freight carriers. Further, the growing demand for rail intermodal services and increasing crude oil shipments make the expansion plans all the more attractive for Canadian National.
Currently, Canadian National is focusing on train productivity by accelerating the purchase of locomotives, which are being equipped with distributed power capability that allows the company to run longer-haul trains efficiently.
However, headwinds related to lower utility coal shipments and competition from other operators like Union Pacific Corporation (UNP - Free Report) remain near-term concerns for the company’s growth plan.
Canadian National has a Zacks Rank #3 (Hold).
Other Railroad Stocks
Other stocks worth considering within the sector are Genesee & Wyoming Inc. (GWR - Free Report) –with Zacks Rank #1 (Strong Buy) – and Canadian Pacific Railway Limited (CP - Free Report) –with Zacks Rank #2 (Buy).