The current momentum in the crude oil industry is driving
expansion plans for
Canadian National Railway Company
). The company is expected to ship more Alberta crude oil through
LBC Tank Terminals' facility located at Sunshine near Geismar,
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The Sunshine facility, currently undergoing expansion will
benefit Canadian National through its proximity with the two
largest heavy crude refineries in Geismar. Moreover, it also has
access to various pipelines and marine terminal facilities. The
construction is expected to end by October this year and boost
storage capacity to nearly three million barrels.
Canadian National's plan to assign more services to LBC Tank
Terminal remains consistent with its plan to tap opportunities in
the northern Alberta crude oil region. Alberta is one of the
strongest economic regions of Canada and among the largest
producers of energy resources like crude oil (conventional and
synthetic), natural gas and other gas products.
Some of the major oil fields like Brooks, Medicine Hat and
Lethbridge are in Southeast Alberta. We believe that all these
business opportunities bode well for any long-term investment
made by rail freight carriers. Further, the growing demand for
rail intermodal services and increasing crude oil shipments make
the expansion plans all the more attractive for Canadian
Currently, Canadian National is focusing on train productivity by
accelerating the purchase of locomotives, which are being
equipped with distributed power capability that allows the
company to run longer-haul trains efficiently.
However, headwinds related to lower utility coal shipments and
competition from other operators like
Union Pacific Corporation
) remain near-term concerns for the company's growth plan.
Canadian National has a Zacks Rank #3 (Hold).
Other Railroad Stocks
Other stocks worth considering within the sector are
Genesee & Wyoming Inc.
) -with Zacks Rank #1 (Strong Buy) - and
Canadian Pacific Railway Limited
) -with Zacks Rank #2 (Buy).