Canadian National Railway Company (CNI) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.

Let’s delve deeper.

Southward Earnings Estimate Revision: The Zacks Consensus Estimate for 2025 earnings has been revised 6.2% downward over the past 90 days. The unfavorable estimate revision indicates brokers’ lack of confidence in the stock.

Dim Price Performance: The company’s price trend reveals that its shares have lost 14.1% over the past six months compared with the industry’s 3.2% decline.

Six-Month Price Comparison

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Weak Zacks Rank and Style Score: CNI currently carries a Zacks Rank #4 (Sell). The company’s current Value Score of D shows its unattractiveness.

Negative Earnings Surprise History: CNI has a disappointing earnings surprise history. The company’s earnings lagged the Zacks Consensus Estimate in two of the last four quarters (outpaced the mark in the remaining two quarters), delivering an average miss of 0.92%.

Other Headwinds: Supply-chain woes, network fluidity challenges and weak intermodal scenarios are hurting CNI’s performance. CNI is grappling with rising expenses owing to higher labor and fringe benefits expenses, loss on assets held for sale, and the negative translation impact of a weaker Canadian dollar. Operating expenses rose by 6.5% from the year-ago figure during the first nine months of 2024.

A debt-laden balance sheet is another concern. Moreover, CNI exited the September-end quarter with a current ratio (a measure of liquidity) of 0.64. A current ratio of less than 1 is not desirable as it indicates that the company does not have sufficient cash to meet its short-term obligations.

Bearish Industry Rank: The industry to which CNI belongs currently has a Zacks Industry Rank of 153 (out of 248 groups). Such a weak rank places the industry in the bottom 38% of the Zacks industries. Studies have shown that 50% of a stock price movement is directly tied to the performance of the industry group that it hails from.

In fact, a robust stock in a weak industry is likely to underperform an ordinary stock in a strong group. Therefore, considering the industry’s performance becomes imperative.

Stocks to Consider

Some better-ranked stocks from the Zacks Transportation sector are Southwest Airlines LUV and SkyWest (SKYW). Each stock presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Improvement in air travel demand bodes well for Southwest Airlines' top line. LUV’s solid balance sheet allows the company to reward its shareholders through share buybacks and dividend payments.

LUV has an expected earnings growth rate of 105% for 2025. The Zacks Consensus Estimate for 2025 earnings has been revised 5.3% upward in the past 60 days. 

SKYW has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 79.1%. The Zacks Consensus Estimate for 2025 earnings has been revised 5.3% upward in the past 60 days.

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Southwest Airlines Co. (LUV) : Free Stock Analysis Report

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