Canadian National Railway Company (CNI – Free Report) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revision: The Zacks Consensus Estimate for 2025 earnings has been revised 6.9% downward over the past 90 days. The unfavorable estimate revision indicates brokers’ lack of confidence in the stock.
Dim Price Performance: The company’s price trend reveals that its shares have lost 25.4% over the past year compared with the transportation-rail industry’s 13.4% decline.
One-Year CNI Stock Price Comparison
Image Source: Zacks Investment Research
Weak Zacks Rank and Style Score: CNI currently carries a Zacks Rank #4 (Sell). The company’s current Value Score of D shows its unattractiveness.
Negative Earnings Surprise History: CNI has a disappointing earnings surprise history. The company’s earnings lagged the Zacks Consensus Estimate in three of the last four quarters (outpaced the mark in the remaining quarter), delivering an average miss of 2.54%.
Other Headwinds: Supply-chain woes, network fluidity challenges and weak intermodal scenarios are hurting CNI’s performance. Rail network issues due to headwinds like locomotive or crew/labor shortages and other service disruptions also represent a major challenge for CNI. Further, CNI continues to grapple with rising expenses, owing to higher labor and fringe benefits expenses and a rise in purchased services and material costs. Operating expenses rose 5.5% from the year-ago figure for the full year 2024.
A debt-laden balance sheet is another concern. Moreover, CNI exited the December-end quarter with a current ratio (a measure of liquidity) of 0.66. A current ratio of less than 1 is not desirable as it indicates that the company does not have sufficient cash to meet its short-term obligations.
Bearish Industry Rank
The industry to which CNI belongs currently has a Zacks Industry Rank of 157 (out of 248 groups). Such a weak rank places the industry in the bottom 36% of the Zacks industries. Studies have shown that 50% of a stock’s price movement is directly tied to the performance of the industry group to which it belongs.
In fact, a robust stock in a weak industry is likely to underperform an ordinary stock in a strong group. Therefore, considering the industry’s performance becomes imperative.
Stocks to Consider
Investors interested in the Zacks Transportation sector may consider better-ranked stocks like SkyWest (SKYW – Free Report) and Frontier Group (ULCC – Free Report) .
SkyWest
SkyWest currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
SKYW has an expected earnings growth rate of 16% for the current year. The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average beat of 16.7%. Shares of SKYW have risen 9.1% over the past six months.
Frontier Group
Frontier Group flaunts a Zacks Rank of 1 at present.
ULCC has an expected earnings growth rate of more than 300% for the current year.
The company has an encouraging track record with respect to earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once. The average surprise is 1.1%. Shares of ULCC have surged 43% in the past six months.
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