Canadian National Railway Company
) entered into a labor contract with the International
Brotherhood of Electrical Workers (IBEW) System Council 11. Per
the tentative agreement, the council will renew the contracts of
about 700 signals and communications workers of the company in
CDN NATL RY CO (CNI): Free Stock Analysis
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However, none of the parties disclosed the details of the
agreement as it is pending necessary approvals by the members of
the union. The current contract between the parties will come to
an end on December 31, 2012. Canadian National Railway expects to
receive the approval of the union through voting before the end
of January 2013.
Based in Montreal, Canadian National Railway is engaged in the
rail and related transportation business and operates as the
largest rail network in Canada. It is the only transcontinental
network in North America.
We expect to see strong demand for the company's services across
all its businesses with growth in wholesale and retail market
supporting high volumes. The company will likely keep a
sustainable operating ratio, given stronger volume growth at low
incremental cost with productivity initiatives such as improving
system velocity and fuel efficiency.
Canadian National Railway's growth momentum is also supported by
a healthy balance sheet position. The increased liquidity profile
of the company will not only aid in higher investment, but also
assure shareholder return via dividend payouts and share
Despite these positive aspects, we remain cautious on the stock,
given its increasing pension expenses as well as the downtrend in
coal and crop markets. Instability in the economy along with
competitive threats from peers such as
Canadian Pacific Railway Limited
) and exchange rate fluctuations may limit the upside potential
of the stock. Hence, we maintain our long-term Neutral
recommendation on Canadian National Railway.