Leading Canadian railroad company, Canadian National Railway (CNI) aims to introduce intermodal services in June this year. The new services will connect Port of Prince Rupert in British Columbia with Calgary and Edmonton intermodal terminals located in the Canadian province Alberta.
Further, Canadian National also plans to relocate its Calgary terminal to a new logistic terminal in Rocky View County, near Calgary airport. The relocation is expected to be completed by the beginning of next year.
Albertais one of the strongest economic regions of Canada and among the largest producers of energy resources like crude oil (conventional and synthetic), natural gas and other gas products. Some of the major oil fields like Brooks, Medicine Hat and Lethbridge are in Southeast Alberta. We therefore believe that the region represents good business opportunities that may be tapped by rail freight carriers. Further, the increasing demand for rail intermodal services and growing crude oil shipments make the expansion plans all the more attractive for Canadian National.
The company is focusing on train productivity by accelerating the purchase of locomotives, which are being equipped with distributed power capability that allows the company to run longer-haul trains efficiently.
In order to support these development projects, the company plans to invest C$1.75 billion in track and infrastructure improvement, as well as productivity initiatives in 2011. Approximately $1 billion will be directed toward track and infrastructure improvement, as well as productivity initiatives, approximately C$150 million toward the acquisition of new freight cars and upgrading of locomotive and around C$500 million toward information technology and various new projects.
However, headwinds related to fuel cost, lower-utility coal shipments and competition from peers like Canadian Pacific Railway Ltd. (CP) remain near-term concerns.
We maintain our long-term Neutral recommendation on the stock supported by a Zacks #3 Rank (Hold).
CDN NATL RY CO (CNI): Free Stock Analysis Report
CDN PAC RLWY (CP): Free Stock Analysis Report
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