Canadian National Railway Co. $55 - Toronto symbol CNR

CANADIAN NATIONAL RAILWAY CO. $55 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 473.4 million; Market cap: $26.0 billion; SI Rating: Above average) operates a freight rail network across Canada, and in parts of the U.S. In the three months ended June 30, 2008, CN’s earnings fell 11.0%, to $459 million from $516 million a year earlier. Per-share earnings fell just 5.9%, to $0.95 from $1.01, on fewer shares outstanding. The company’s U.S. operations supply about 20% of its revenue, and the high value of the Canadian dollar cut CN’s earnings in the latest quarter by $0.05 a share. Revenue grew 3.5%, to $2.1 billion from $2.0 billion a year earlier. Higher volumes of grain, coal and petrochemicals helped offset lower shipments of lumber and automobiles. CN’s operating ratio weakened to 66.3% from 60.0% a year earlier, due to higher fuel costs. CN’s earnings should grow to $3.49 a share in 2008, and the stock trades at 15.8 times that estimate. The $0.92 dividend yields 1.7%. CN is a buy.

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