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Morgan Stanley upbeat on CN’s 2024 growth expectations

Analysts sees CN’s 10% growth potential comparing well versus other railways

Canadian National reported full-year 2023 revenue of CA$12.47 billion and profit of CA$6.32 per share. (Photo: Canadian National)

Canadian National Railway Co. (CN) on Tuesday reported revenue of CA$3.28 billion ($2.4 billion) in the fourth quarter and adjusted earnings per share of CA$2.02. 

CN (NYSE: CNI) beat analysts’ expectations of EPS of CA$1.99 and revenue of CA$3.25 billion. For the year, the company reported revenue of CA$12.47 billion and profit of CA$4.17 billion, or CA$6.32 per share.

“These are the kind of results we can be very proud of in a challenging environment,” Tracy Robinson, CN president and CEO, said in a call with analysts on Tuesday. “We said last quarter that we’ve seen the bottom in volumes and this has played out as we expected. … Now there remain question marks on the economy as we move into 2024. We’re expecting continued improvement as the year progresses.”

The Montreal-based railroad expects full-year EPS growth of 10% in 2024. CN reiterated its longer-term financial perspective and continues to target annual EPS growth in the range of 10% to 15% over the 2024-26 period.


CN said growth in 2024 should be driven by increasing volumes, pricing above rail inflation and incrementally improving efficiency, according to a news release.

The fourth-quarter and full-year results left analysts from Morgan Stanley optimistic. They said the railway’s projected 10% growth “compares well versus [its] rail peers.”

“We acknowledge that January faces very difficult comparables and there are a few cost headwinds to overcome, but operating leverage when volumes return, a solid pricing outlook and buyback assistance should more than offset, in our view,” Morgan Stanley said in a note after the results were reported. “We will see how conservative this guide is probably by mid-year but 10% earnings growth in this challenging macro is not to be taken for granted, especially when we believe U.S. rail peers are likely to have a much harder time getting there.”

Morgan Stanley said while CN’s intermodal segment struggled “on the international side due to lingering port strike effects and domestically due to weaker retail volumes,” it was offset by strength in bulk and merchandising shipping.


CN posted revenue ton miles (RTMs) of CA$61 million during the fourth quarter, a year-over-year increase of 2%. For the full year, RTMs decreased 1% to CA$232 million.

CN said it expects forest products shipments to stabilize to pre-pandemic levels with a gradual recovery. Shipments of grain should be more normalized toward the end of 2024 and into 2025, the company said.

“CN noted optimism about construction end markets,” Morgan Stanley said. “They also anticipate more frac sand and liquefied gas shipments due to increased drilling in Northeast British Columbia. Crude shipments should also be supported by a positive forecast for Canadian production overall as well as the startup of the Trans Mountain Pipeline.”

Another positive has been CN’s Falcon Premium service, which launched in April. The service has produced steady cross-border volumes, company officials. Falcon Premium is a service among CN, Union Pacific (NYSE: UNP) and Mexico’s Ferromex.

The goal of Falcon Premium is to create an intermodal service connecting eastern and western Canada with Chicago to rail terminals throughout Mexico.

“It’s been a very exciting product we’ve had with our partners at [Ferromex] and Union Pacific,” Derek Taylor, CN’s executive vice president and chief field operations officer, said on the call. “We’re consistently delivering on the published transit time with our customers, and we look forward to continuing to grow that here in 2024.”

While CN officials said Falcon Premium momentum is solid, they stated it will be “very slow growth off the truck market.”

“CN said they are working with their partners to grow Falcon Premium, management noted they


will be going after truck business when the bid cycle starts up in the first quarter of 2024 and that they ‘hope to see some solid growth’ through the rest of the year,” Morgan Stanley said.

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Noi Mahoney

Noi Mahoney is a Texas-based journalist who covers cross-border trade, logistics and supply chains for FreightWaves. He graduated from the University of Texas at Austin with a degree in English in 1998. Mahoney has more than 20 years experience as a journalist, working for newspapers in Maryland and Texas. Contact nmahoney@freightwaves.com