CN Rail, Canada's biggest railway, would benefit from the North American cyclical recovery, analyst Fadi Chamoun said in a note to clients.
The company has opportunities to grow its exposure to the transpacific container trade and to capture a portion of the export potash market, which is currently exclusive to CP Rail, Chamoun said.
"We believe that at least over the course of the next two years, CN Rail's margin improvement opportunities remain significant as the company leverages its recent investments in siding extensions," the analyst said.
On CP Rail, Chamoun said incremental operating margins should remain high as the company looks to benefit from recent investment in network optimization tools and track infrastructure.
The analyst expects demand and shipments for CP Rail, which has disproportionate exposure to bulk exports such as coal and fertilizers, to improve going forward. (Reuters)
