Canadian National Railway (TSX:CNR) stock has had a bit of a bumpy ride recently, down about 14% from its 52-week high. For some investors, this dip might seem alarming, but it also opens up a potential buying opportunity for those looking to grab a solid stock “on sale.”
CNR stock, a stalwart in North American transportation, boasts an impressive network that spans nearly 20,000 miles. Plus, it plays a crucial role in transporting goods across Canada and the United States. The recent dip in share price presents a chance to snag a piece of this transportation giant at a relative discount, especially considering its resilience, solid fundamentals, and long-term growth prospects.
Into earnings
The company recently released its third-quarter earnings for 2024, showcasing its adaptability in challenging conditions. Revenue came in at $4.1 billion, up 3% year-over-year, and revenue ton miles increased by 2%. Despite pressures like wildfires and labour issues, CNR has maintained stability in its operations, thanks to a flexible and efficient operating plan. This ability to stay the course amid difficulties demonstrates the strength of its business model and management’s commitment to aligning resources with demand.
CNR stock’s operating cash flow remains strong, reported at $7.1 billion over the trailing 12 months. This healthy cash flow enables the company to fund its dividend payments and support its capital spending initiatives, a reassuring indicator for investors focused on financial stability. Plus, with a current ratio of 0.6, CNR stock maintains sufficient liquidity to effectively handle short-term obligations.
CNR stock has consistently proven to be a robust performer over the years. Its trailing price-to-earnings (P/E) ratio of 18.5 is fairly reasonable, given the high-quality operations and market share it commands. With steady revenue and earnings growth, this is a company that has weathered economic cycles and emerged strong. Plus, CNR stock boasts an operating ratio of 63.1%, indicating that its expenses are well-managed relative to its revenue. Even as CNR tackles short-term challenges, its long-term performance continues to signal resilience.
Today’s benefits
Looking forward, CNR stock has set its sights on stable growth. The company has projected that its adjusted earnings per share (EPS) will grow in the high single digits from 2024 to 2026 – a rate that’s both sustainable and attractive for investors seeking gradual, consistent returns. Plus, CNR stock plans to invest around $3.5 billion in its capital program, further reinforcing its infrastructure and positioning itself well for future demand.
At its current price, CNR stock’s dividend yield has become more appealing, with a forward annual dividend yield of 2.2%. This payout is relatively high for a stock in the transportation sector, making CNR stock an attractive option for income-focused investors. The company’s payout ratio sits at 39.4%, suggesting that dividends are well-covered by earnings, thus adding to CNR’s appeal as a reliable income stock.
CNR’s market cap has seen some fluctuations, now at $98.4 billion, down from $114.2 billion at the end of 2023. The stock’s current price-to-sales ratio of 5.8 and price-to-book ratio of 5.1 reflect its more affordable valuation compared to earlier this year. Investors now have a chance to buy CNR stock at a valuation that is lower than it was at its recent peak, thus making it more attractive for value-seekers looking for a long-term investment.
Bottom line
Despite the recent drop, CNR shares have shown resilience, bouncing slightly in recent trading sessions. This uptick could indicate a return of investor confidence as the company continues to stabilize operations and align its strategies with market demand. This bounce suggests that investors recognize CNR’s intrinsic value and potential for recovery.
CNR stock’s dip provides a window of opportunity for investors seeking a high-quality stock at a discount. The company’s recent earnings show its resilience, while its future outlook, stable dividend, and institutional support make it a compelling choice. For those eyeing a reliable, long-term investment, CNR stock could be the ticket, especially while it’s “on sale.” This dip might not last long, making it a timely option for those ready to jump aboard.
