Tuesday, Canadian National Railway (TSX:CNR) (NYSE:CNI) shares received an optimistic update from Citi, as the firm upgraded the stock from Neutral to Buy and increased the price target to $130.00 from $126.00. The upgrade is based on the premise that the current low investor expectations present an opportunity for the company to exceed market forecasts.
Citi's analysis points to Canadian National Railway's robust network and its potential for a high single-digit earnings per share (EPS) compound annual growth rate (CAGR) through 2027. This growth projection includes the possibility of double-digit EPS expansion in the years 2025 to 2026. The firm's positive outlook is further supported by Canadian National Railway's structural network benefits, which include long-haul lengths and access to three coasts.
These strategic advantages are expected to contribute to higher incremental margins for Canadian National Railway as the volume environment improves. Citi's commentary emphasizes the company's strong position to leverage its network for better financial performance in the coming years.
The upgraded rating and the new price target reflect confidence in Canadian National Railway's ability to capitalize on its high-quality network and favorable market conditions. The price target adjustment suggests a modest but positive shift in the value Citi sees in the company's shares.
InvestingPro Insights
Adding to Citi's optimistic outlook on Canadian National Railway (NYSE:CNI), recent data from InvestingPro provides further context to the company's financial position and market performance. CNI's market capitalization stands at $70.03 billion, reflecting its significant presence in the Ground Transportation industry. The company's P/E ratio of 18.31 suggests a moderate valuation relative to its earnings, which aligns with Citi's view of potential for growth.
InvestingPro Tips highlight CNI's impressive gross profit margins, which are reflected in the data showing a gross profit margin of 55.08% for the last twelve months as of Q3 2024. This robust profitability supports Citi's projection of high single-digit EPS growth. Additionally, CNI has maintained dividend payments for 29 consecutive years, demonstrating a commitment to shareholder returns that complements its growth potential.
However, investors should note that 22 analysts have revised their earnings downwards for the upcoming period, which may indicate some near-term challenges. Despite this, CNI's long-term prospects remain strong, with the company operating with a moderate level of debt and maintaining profitability over the last twelve months.
For those seeking a deeper analysis, InvestingPro offers 11 additional tips that could provide valuable insights into CNI's investment potential.
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