Canadian National Railway Company (TSE:CNR): What Are The Future Prospects?

In December 2018, Canadian National Railway Company (TSE:CNR) released its earnings update. Generally, analysts seem cautiously bearish, as a 3.8% rise in profits is expected in the upcoming year, against the higher past 5-year average growth rate of 14%. Currently with trailing-twelve-month earnings of CA$4.3b, we can expect this to reach CA$4.5b by 2020. I will provide a brief commentary around the figures and analyst expectations in the near term. Readers that are interested in understanding the company beyond these figures should research its fundamentals here.

Check out our latest analysis for Canadian National Railway

Can we expect Canadian National Railway to keep growing?

The 22 analysts covering CNR view its longer term outlook with a positive sentiment. Broker analysts tend to forecast up to three years ahead due to a lack of clarity around the business trajectory beyond this. I’ve plotted out each year’s earnings expectations and inserted a line of best fit to calculate an annual growth rate from the slope in order to understand the overall trajectory of CNR’s earnings growth over these next few years.

TSX:CNR Past and Future Earnings, March 29th 2019
TSX:CNR Past and Future Earnings, March 29th 2019

This results in an annual growth rate of 5.6% based on the most recent earnings level of CA$4.3b to the final forecast of CA$5.1b by 2022. This leads to an EPS of CA$7.49 in the final year of projections relative to the current EPS of CA$5.89. As revenues is expected to outpace earnings, analysts expect margins to contract from the current 30% to 30% by the end of 2022.

Next Steps:

Future outlook is only one aspect when you’re building an investment case for a stock. For Canadian National Railway, I’ve put together three pertinent factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is Canadian National Railway worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether Canadian National Railway is currently mispriced by the market.
  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Canadian National Railway? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.