Canadian National Railway - Primed for Growth

Canadian National Railway (CNI) is Primed for Growth having recovered business momentum after switching CEO in early 2018.


CNI has arguably the best network footprint among North American Railroads due to its unique access to 3 coasts on Pacific (Asia access), Atlantic (Europe access) and Gulf Coast (South America and Africa access). CNI also has access to Prince Rupert closest port to China and Halifax the closest port to Europe from North America giving it a competitive advantage. CNI also has an advantage due to EJ&E outer belt access in Chicago.

CNI has the most diverse business mix with no segment accounting for more than 25% and also the least coal exposure among North American Railroads. CNI also has the strong Lumber, Auto and Intermodal franchise.

CNI Financial Results over the last 7 years since economic recovery after 2009 financial crisis is highlighted below.

 CNI has generated great returns for shareholders since IPO in 1996. CNI has raised dividend 16% CAGR since IPO and string total returns.

CNI estimates EPS for 2019 of C$6.25 up 14% from C$5.5 in 2018. CNI has raised dividend by 18% recently to C$2.15 per year in Feb 2019 which will be a 33% payout ratio. Over the last 2-3 years UNP, CSX, NSC, CP have outperformed but Mritik Capital expects CNI to perform the best among peers over the next 3-5 years. CNI currently trades for US$86 (C$113.5) which is 18 times forward earnings and is fairly valued. CNI yields ~2% currently and plans to spend C$2.5B in share buyback for 2019.


Canadian National Railway Feb 2019 Presentation