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Canadian National Railway Company (NYSE:CNI) fell in early trading on Monday after Deutsche Bank downgraded the rails stock to a Hold rating from Buy.
Analyst Amit Mehrotra warned that there are tangible data points that put Canadian National Railway (CNI) increasingly in a negative light, including growing concerns on Canadian consumers, Canadian grain headwinds starting in Q2 of 2024, and recent government intervention in Mexico. “We believe CNI has managed the current difficult environment well, but our forward estimates together with the company’s high multiple just don’t warrant a Buy rating, in our view,” he warned. Mehrotra and team also think there is greater risk of derating at CNI compared to other rails as free cash flow growth may not keep pace with book earnings growth.
Deutsche Bank’s price target on CNI is based on 19X applied to the 2025 EPS estimate. While that PT reflects the historical average multiple, the firm see possible downside if free cash flow growth is lower than EPS growth, due to increases in capex.
The Seeking Alpha Quant rating on CNI is also flashing Hold due to low factor grades for valuation and growth.
Shares of Canadian National Railway Company (CNI) fell 2.17% in premarket trading to $112.82 vs. the 52-week trading range of $103.36 to $129.89.