The Canadian rail strikes of 2024 have arrived, with CN Rail (TSX: CNR) and Canadian Pacific Kansas City (TSX: CP) hitting the pause button on operations after no progress in the hours and minutes leading up to the midnight deadline on August 22, 2024. Undoubtedly, if you’ve been an investor in the rail industry, you’re probably well aware of the implications of a strike. Indeed, rail stoppages can have a drastic impact on the Canadian economy in a very short period of time.
That said, this isn’t the first time some of Canada’s major railways have gone on strike. And, if I had to guess, it isn’t going to be the last time, either. In any case, I wouldn’t make too much of the matter if you’re a long-term holder of either CN Rail or CPKC. Though the federal government has intervened, it appears that only CN Rail is chugging along.
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Rail strikes have arrived: What’s next for rail stocks?
As the week concludes, I expect it’ll be back to business as usual. Of course, strikes can be a source of volatility for shares of the top railway firms involved.
However, in the grander scheme of things, such rail disruptions aren’t really a big deal. At the end of the day, any near-term choppiness in the rail stocks serves as a fantastic long-term buying opportunity for investors seeking exposure to some of the best, wide-moat companies, not just in Canada but on Earth.
Thus far, it seems like the rail strike woes have worked their way into the share prices of both CNR and CP shares. After all, we’ve seen a potential strike coming from many miles away by now. And while a few more days’ worth of striking could be in the cards, I think that the year-end setup for the rail plays couldn’t be better.
CN and CP Rail shares are great buys on the dip
As it stands today, they’re off considerably from their highs. And while they have headwinds to grapple with, even after strike and union woes are dealt with, the price of admission seems way too low given the durable competitive advantages commanded by both companies.
On Friday, CNR stock actually climbed by 1.62%, while CP stock surged close to 1.3%. It’s not exactly the type of reaction you’d expect to see amid recent strike woes. In any case, I find that CNR stock is the far better bet right here, even if it’s closer to being out of the woods regarding Canada’s recent rail stoppages.
At $158 and change per share, CNR stock trades at 18.85 times trailing price to earnings (P/E). The dividend is also bountiful at 2.15%. Meanwhile, CP trades at 29.72 times trailing P/E, with a mere 0.69% yield. CN Rail remains, by far, the cheaper stock, and with a higher yield, I’m still pounding the table on CNR over CP.
Bottom line
Though only time will tell how the end of the rail lockout will pan out, I’d not be rattled in the slightest as a railway investor. Strikes and all the sort are to be expected every so often. While there will be an impact on coming quarterly results, I’d argue that such strikes hurt the clients the rails do business for more than the rail shareholders themselves.
