(Reuters circulated the following on January 15, 2010.)
TORONTO — Raymond James downgraded Canadian National Railway (CNR.TO) (CNI.N) to “market perform” from “outperform,” citing its greater relative exposure to North America’s consumer-led economy that is expected to be more tepid in the short term.
Analyst Steven Hansen, however, said after one of the most difficult freight environments in decades, “the ill-gotten memories of the first half of 2009 are beginning to fade as North American freight patterns demonstrate sustained momentum.”
The analyst also raised his price target on Canadian Pacific Railway (CP.TO) (CP.N) to C$65 from C$55, while maintaining an “outperform” rating on the stock.
“Given the aforementioned freight trends, we believe the outlook for both Canadian National and Canadian Pacific looks very promising,” Hansen said.
While a higher Canadian dollar and surging oil prices may dampen some of this recovery, both railroads will likely continue to demonstrate healthy operating leverage as volumes return at a faster rate than variable costs, Hansen said.
Canadian Pacific shares closed at C$56.39, while those of Canadian National closed at C$73.50 Wednesday on the Toronto Stock Exchange.