(The following story by Scott Deveau appeared on the National Post website on September 24.)
OTTAWA — The Canadian forestry industry continues to tumble with earnings chopped by $509-million in the second quarter to a collective loss of $45-million, as reported in today’s Financial Post. But it’s not just those in the forestry industry that are suffering.
Canadian National Railway Co.’s (CNR/TSX) chief financial officer Claude Mongeau carried a cautious tone Thursday at a transportation conference in Toronto about the forest industry’s continued decline.
With three weeks left in the third quarter, total carloads from the forestry industry are down 15% compared to last year, contributing to an overall drop in carload traffic at the railway of 3.8%.
“This is a significant drag on CNR’s earnings given that forestry products represents a significant portion of CNR’s total revenue – at 24%,” said RBC Capital Markets analyst Walter Spracklin in a note to clients.
Mr. Spracklin said he is lowering his earnings per share estimates for 2007 to $3.50 from $3.60 and his 2008 forecast to $4.06 from $4.17. He said his 2007 EPS estimate implies a 3.4% growth year-over-year, below the company’s forecast of 5%.
He also reduced his price target to $61 from $63.
“We are however maintaining our Outperform, Average risk recommendation,” Mr. Spracklin said. “We continue to like CNR shares when compared to other names in our freight transportation universe – stemming from the long-term competitive advantage that CNR enjoys relative to other modes – most notably trucking.”