(The following report by Scott Deveau appeared on the National Post website on July 16.)
OTTAWA — National Bank Financial analyst David Newman upped his target prices for Canada’s largest railways Thursday ahead of their second quarter results later this month. However, he cautioned that earnings for the quarter may be softer than originally anticipated.
Mr. Newman raised his 12-month target price for the country’s largest railway, Canadian National Railway Co., (CNR/TSX) to $65.50 from $59 a share Thursday.
However, he reduced his earnings estimate for the second quarter to 90¢ a share, down from his original estimate of 92¢, citing several headwinds that the railway has failed to recover from.
For Canada’s No. 2 railway, Canadian Pacific Railway Ltd., (CP/TSX) Mr. Newman increased his 12-month target to $76.50 from $69 a share. Like CN, he said he expects earnings per share for CP in the second quarter of $1.08, down from his original estimate of $1.11.
The Street forecasts EPS for the second quarter of 95¢ and $1.13 for CN and CP respectively.
“While we expect continued weakness in Q2, as weather, strike, and segment specific issues continue, we nevertheless remain bullish on the long-term rail story, with increased pricing power, share gains on truck, and improved returns and cash flow, which should ultimately reward shareholders,” Mr. Newman said in his research note.
CN is due to release its second quarter results on July 23 after market close. CP will release its results on the morning of July 24.