CANADIAN NATIONAL RAILWAY CO. $73 - Toronto symbol CNR

CANADIAN NATIONAL RAILWAY CO. $73 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 461.8 million; Market cap: $33.7 billion; Price-to-sales ratio: 4.1; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.cn.ca) operates Canada’s largest freight-rail network, and serves 16 U.S. states. Microsoft co-founder Bill Gates is CN’s largest shareholder, with just over 10% of the shares. In the three months ended March 31, 2011, CN earned $668 million. That’s up 30.7% from $511 million a year earlier. The company spent $340 million on share buybacks in the latest quarter. Because of fewer shares outstanding, earnings per share rose 34.3%, to, $1.45 from $1.08. If you exclude one-time items in both quarters, mainly gains on sales of rail lines in southern Ontario, earnings per share would have risen 12.5%, to $0.90 from $0.80. Revenue rose 6.1%, to $2.1 billion from $2.0 billion. Even with delays caused by bad winter weather in western Canada, CN’s operating ratio improved to 69.0% from 69.3% a year earlier. (Operating ratio is calculated by dividing a company’s regular operating costs by its revenue. The lower the ratio, the better.) CN expects to earn $4.83 a share in 2011. The stock trades at 15.1 times that figure. CN Rail is a buy.

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