Canadian National Railway Co. $51 - Toronto symbol CNR

CANADIAN NATIONAL RAILWAY CO. $51 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 494.5 million; Market cap: $25.2 billion; SI Rating: Above average) has agreed to buy a major portion of a 319-km railway near Chicago for $300 million U.S. The company also plans to invest $100 million U.S. to expand capacity on the new line. To put these figures in context, CN earned $485 million (Canadian) or $0.96 a share in the third quarter of 2007. This lightly used line would let CN bypass heavy rail traffic in Chicago. However, the company’s plan to increase volume on these tracks has encountered strong opposition from local municipalities. CN had hoped to complete the purchase in early 2008. But an environmental review could delay the transaction by about 18 months. The stock trades at 15.1 times its projected 2007 earnings of $3.38 a share. Earnings should rise to $3.82 a share in 2008 as CN begins to realize the benefits from its new terminal in Prince Rupert, B.C. That gives it a p/e of just 13.4. The $0.84 dividend yields 1.6%. CN Rail is a buy.

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