Canadian National Railway Company
)), which operates the largest rail network in Canada has
initiated operations at Calgary Logistics Park with the opening
of a new intermodal terminal. The terminal is expected to meet
the rising intermodal shipment requirements by increasing network
fluidity as well as remain accretive to revenue growth.
Calgary Logistics Park, which is worth $200 million, primarily
connects the ports of Prince Rupert and Vancouver and covers
major cities in Canada and mid-America. Through the new
intermodal service the park is now available for shipping
consumer as well as industrial products. The new logistics
facility includes a warehouse of 2.5 million square feet and a
rail-to-truck transload facility alongside the autoport to
facilitate finished vehicle shipments.
Canadian National remains focused on improving rail
infrastructural developments. The company expects investment of
over $1 billion towards track and infrastructure improvement as
well as productivity initiatives. The company aims to maintain
high railroading (velocity, reliability, lowers costs and asset
utilization) standards. As a result, it seeks productivity
initiatives to reduce costs and leverage its assets.
Besides working on intermodal facilitates, the company expects
to equip its locomotives with advanced technologies like Trip
Optimizer and Wi-Tronix to increase fuel efficiency.
Additionally, it is optimizing its coal trains and potash train
cars to accommodate demand fluctuation.
We believe Canadian National's ability to transport
incremental volume at a low cost provides it with greater
operating leverage. In an effort to propel growth, the company
seeks a 2-4 year capacity improvement plan. Moreover, in the near
term, it also plans to acquire 2,200 new freight cars and 1,300
new containers to support volume growth and service levels.
However, competitive threats from its major rivals, including
Canadian Pacific Railway Limited
), highly unionized workforce and regulatory pressures may impede
growth at Canadian National.
The stock currently retains a Zacks Rank #3 (Hold). For the
long term, we have a Neutral recommendation on Canadian
CDN NATL RY CO (CNI): Free Stock Analysis
CDN PAC RLWY (CP): Free Stock Analysis Report
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