Canadian National Railway (USA) (NYSE:CNI) — I last reviewed CNI, Canada’s largest railroad, on Nov. 4 with a buy at $60 and a target at $70. The stock never pulled back to $60, but did move to a closing high at $71 on Jan. 13.
Standard & Poor’s forecasted earnings per share for 2016 at $3.39. The company reported $3.41 and forecasts EPS for 2017 at $3.75 and increased its target for 2018 to $4.10, a 9% rate of growth.
Revenues for this well-managed company are expected to continue to improve, boosted by the stability of their operations. S&P considers CNI to be “the most efficiently run of the major North American railroads.” And management could benefit from crude oil prices that appear to be stabilizing at over $50 per barrel, while China’s economy, which imports much of Canada’s coal, could also be improving.
Additionally the company is viewed as positioned to benefit from an improving economy in North America. Thus, S&P’s price target for CNI is $80, which they said is conservative and subject to change (presumably higher).
For seven months, CNI has maintained a bull channel as the stock traded above and below its 50-day moving average line. It jumped to a closing high of $67 in October, which connects to the twin lows of December and January, thus forming a solid line of support.
The stock sprang from that line to new highs in both months and is now in the process of again testing the support line at $67. Traders should try to buy CNI at $69, since placing buys closer to support did not result in executions in November. The proposed target of $80, if achieved, would provide a return of about 16% in 90 days.
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