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CN Rail Announces New Investments; Workers Go on Strike

Story Highlights

The economy relies on railway companies to deliver goods across North America and will continue to do so for a long time. Therefore, it is good to see that the company is actively investing in order to improve its operations. However, a prolonged strike could further strain an already tight supply chain, causing price increases to worsen.

Canadian National Railway (TSE: CNR) (CNI) is a Canada-based company that is engaged in the rail and related transportation business. Its services include rail, intermodal, trucking, supply chain services, business development, and maps and network.

The company offers its services in industries including automotive, coal, fertilizer, food and beverages, forest products, dimensional loads, grain, metals and minerals, and petroleum and chemicals.

Canadian National Railway Announces New Investments

On Monday, Canadian National Railway announced quite a bit of news. To begin with, it announced over $700 million in new investments, with $390 million being allocated to British Columbia, while $335 million will be invested in Quebec.

The money will be going towards initiatives such as improving technology, capacity, and decarbonization efforts. In addition, the company will be performing maintenance work on bridges, culverts, signal systems, railroad ties, and track infrastructure.

CNR Workers Go on Strike

However, 750 signals and communications union employees went on strike after failed negotiations. The company had offered to increase wages by 10% over three years and more favorable schedules that would secure two consecutive days off. Nevertheless, the offer was rejected by the union.

With supply chains already strained, a prolonged strike could cause shortages to get worse in Canada, as its economy is heavily dependent on railways to transport goods. Indeed, even prior to COVID-19, previous strikes at the company have caused shockwaves throughout various industries.

Luckily, the company put out a statement claiming that normal rail operations are continuing safely despite the strike. Nonetheless, it remains to be seen how long this issue will take to become resolved.

Analyst Recommendations

Canadian National Railway has a Moderate Buy consensus rating based on seven Buys and 11 Holds assigned in the past three months. The average Canadian National Railway price target of C$160.68 implies 13.8% upside potential.

Final Thoughts

The economy relies on railway companies to deliver goods across North America and will continue to do so for a long time. Therefore, it is good to see that the company is actively investing in order to improve its operations. However, a prolonged strike could further strain an already tight supply chain, causing price increases to worsen.

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