In This Article:
Canadian National Railway’s CNI robust growth initiatives are boosting the company’s prospects. The shareholder-friendly approach is encouraging. However, the economic downturn does not bode well for CNI.
Factors Favoring CNI
Despite a challenging macroeconomic environment, CNI’s growth initiatives remain on track. The company is seeing positive progress in key areas, such as expanding frac sand terminal capacity to support drilling activities in Northeast BC and Alberta, with a unit train terminal set to open by year-end and plans for two more next year.
CNI is making strides in the renewable sector, ramping up crushed plant capacity. The Greater Toronto Area fuel terminal is also performing as expected, with increasing volumes of gasoline, diesel and ethanol flowing into a growing market. These developments demonstrate CNI's ability to drive growth and adapt to market conditions, positioning the company well for continued success.
CNI’s proactive approach to safety is evident in its comprehensive programs designed to reduce risks and improve frontline performance. The company has trained nearly 500 frontline managers on exposure reduction and human performance techniques, with plans to reach 1,000 by the end of the year.
Moreover, the company uses leading safety indicators and innovative tools like the slack simulator and walking simulator to prepare employees for real-world challenges in a controlled environment. This focus on safety resulted in a 30% improvement in accident frequency and a 4% improvement in injury frequency in the third quarter. CNI remains committed to its goal of zero injuries and accidents, reflecting its strong safety culture.
Canadian National’s commitment to rewarding shareholders through dividends and share repurchases is encouraging. In the fourth quarter of 2024, CNI declared a quarterly dividend of C$0.8450 per share. Under the company’s current share repurchase program, which runs from Feb. 1, 2024 to Jan. 31, 2025, CNI has repurchased nearly 12 million shares for a total of almost $2.1 billion as of the end of September.
CNI: Key Risks to Watch
The continued economic downturn is significantly impacting CNI’s prospects. The company is mired in several headwinds, including labor uncertainty and work stoppage, wildfires in Alberta and weaker-than-expected demand for forest products and metals.
Canadian National’s financial stability is challenged by increased operating expenses and weak liquidity. In the third quarter of 2024, total operating expenses rose 5.1% year over year. This surge in operating expenses was driven by elevated labor costs, purchased services and material costs and fuel expenses, adversely impacting the company’s bottom line.