CNR Stock: Can the Top Stock Keep it Up?

CNR (TSX:CNR) stock has had a pretty crazy last few years, but after a strong fourth quarter, can the top stock keep it up?

| More on:
Freight Train

Image source: Getty Images

Canadian National Railway (TSX:CNR) is due to report earnings after markets close as of writing this article. CNR stock may have a long history of performance on the market, but it’s also had quite an interesting recent past. Today, let’s look at the changes CNR stock has made and what investors should expect from the railway during its next earnings report.

About CNR stock

CNR stock is one of the largest and most prominent transportation companies in North America, with a rich history spanning over a century. It operates an extensive network of rail lines spanning Canada and extending into the United States, with connections to key ports, cities, and industrial centres. Its network covers approximately 32,000 kilometres of track, making it one of the most comprehensive rail systems on the continent.

Under Hunter Harrison, the company expanded its operations into a premium railway line. CNR stock has been investing heavily in expanding its network and improving its infrastructure. This includes investments in new tracks, terminals, and technology to enhance efficiency and capacity.  

It also has experienced significant growth in its intermodal business, which involves the transportation of shipping containers and truck trailers. This growth has been driven by the increasing demand for freight transportation services, particularly in the e-commerce sector.

Growth to roots

In the last five years, however, CNR stock was trying something new. After streamlining routes, improving scheduling, and implementing new technologies like Positive Train Control (PTC) to enhance efficiency and on-time performance, the company wanted more growth.

This came down to the battle for Kansas City Southern, with CNR stock making the first move back in 2021. CNR stock offered a cash-and-stock deal valued at US$33.7 billion, or $325 per share, for KCS in August 2021. Both CNR and Canadian Pacific Kansas City increased their offers throughout the process, with CNR’s final offer reaching US$34 billion. However, KCS opted for CP Rail’s offer in August 2022, citing it as a “superior proposal” due to regulatory and antitrust considerations.

This led CNR stock to go back to its routes after a period of volatility. But this, in turn, has made the company highly profitable at a time when companies across the world need to hold onto cash. In fact, it’s turned CNR stock into a value stock once more.

Recent performance and earnings

So, now, we can look at whether there has been some positive momentum that could continue during the first quarter of 2024. This can be done by looking at the recent few quarters to see if the stock has seen more and more positive growth.

During the second quarter, CNR stock reported revenue of $4.057 billion, with operating income of $1.6 billion. It also reported that the next half of the year could be weaker than anticipated. And that came to fruition in the third quarter, with revenue of $3.987 billion, and operating income of $1.517 billion.

By the fourth quarter, revenue improved significantly, however, to $4.471 billion, and operating income to $1.818 billion. The company then announced it expects to deliver adjusted earnings per share (EPS) growth of 10%. Further, the company said it would be investing $3.5 billion in its capital program. This EPS growth should continue between 2024 and 2026.

Bottom line

How is the company keeping up with these levels? Traffic volumes and expenses could be stabilizing, with interest rates getting under control as the company brings down debt. And given its financial stability, the company looks well positioned to have a strong first quarter.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Canadian National Railway and Canadian Pacific Kansas City. The Motley Fool has a disclosure policy.

More on Dividend Stocks

bulb idea thinking
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

Got $500 to invest in Canadian dividend stocks? Here are three quality stocks for growing streams of safe dividend income.

Read more »

Arrowings ascending on a chalkboard
Dividend Stocks

Soaring Dividends: 2 TSX Stocks Delivering Value at All-Time Highs

Buying these value TSX dividend stocks today can help you lock in high dividend yields and strong returns over the…

Read more »

Business success with growing, rising charts and businessman in background
Dividend Stocks

5 TSX Stocks With High Dividend Growth to Buy Now

These TSX stocks sport a high dividend growth rate and are known for consistently rewarding their shareholders with increased cash.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

Canadian Blue-Chip Stocks: The Best of the Best for May 2024

These two blue-chip stocks are up in 2023, sure, but have seen even more growth in the last few decades.…

Read more »

Couple relaxing on a beach in front of a sunset
Dividend Stocks

Passive Income: How to Make $33 Per Month Tax-Free by Doing Nothing

Hold monthly paying dividend stocks such as Exchange Income in your TFSA to begin a tax-free stream of passive income…

Read more »

data analyze research
Dividend Stocks

Is Telus Stock a Buy on a Dip?

Telus is down more than 20% over the past year and now offers a great dividend yield.

Read more »

A plant grows from coins.
Dividend Stocks

2 Top Dividend-Growth Stocks to Buy in May

These two dividend stocks saw major growth after earnings that promised more was coming in the future. And now could…

Read more »

Dots over the earth connecting the world
Dividend Stocks

Best Stocks to Buy in May 2024: TSX Telecommunication Services Sector

The telecommunication services sector is currently going through an upheaval. It is a good time to buy these stocks.

Read more »