Canadian rail operators favored over US peers ahead of earnings season - BofA
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Ahead of earnings season for rail operators across North America, Canadian National Railway (NYSE:CNI) and Canadian Pacific (NYSE:CP) are receiving more investor interest, according to Bank of America.

The team noted that the first quarter was marked by soft volumes and a continued overhang from derailment issues, most notably impacting Norfolk Southern (NSC). Equity analyst Ken Hoexter reeled in EPS estimates for Union Pacific (UNP) given its expected volume shortfall and Norfolk Southern (NSC) due to both volume and service concerns. 

CSX Corp. (CSX) meanwhile could be set to exceed expectations in its coming report by contrast, Hoexter told clients. He highlighted labor availability as a key tailwind for CSX Corporation (CSX).

Still, the US rail operators are seeing lower interest levels than their Canadian peers, which are viewed as less risky at present. Additionally, Canadian National Railway (CNI) service is reportedly at a âmulti-year best.â

âAt the rails, investors continue to favor Canadians (CNI/CP) in discussions, given top line growth and margin gains, evident by CNâs 5-year best velocity levels and CPâs robust relative performance and its pending KCS integration,â Hoexter explained. 

Along with the tempered EPS expectations for Norfolk Southern (NSC) adding to regulatory overhang, Hoexter trimmed his price target to $233 from $269, but retained a Buy rating. A Buy rating was likewise maintained for Canadian National (CNI), Canadian Pacific (CP), Union Pacific (UNP), and CSX Corp. (CSX). 

âOur Buys on CSX, CNI, and CP are predicated on solid service, while UNP has the potential for a strong proven operator, such as Jim Vena, to be named CEO (CEO Fritz to step down in 2023),â Hoexterâs team concluded. 
Read more on regulatory issues facing Norfolk Southern.