Canadian National initiated with a Hold at Jefferies

Jefferies initiated coverage of Canadian National with a Hold rating and $130 price target. While the rail industry has historically enjoyed pricing power and a “strong appetite” for shareholder returns, we’re at or near peak margin and reinvestment to improve service and bring volumes back onto the rails could pressure buyback activity in the near-term, the analyst tells investors in a research note. The firm prefers shares of Canadian Pacific Kansas City and Norfolk Southern for the former’s “idiosyncratic growth” and the latter’s and margin story. It believes valuations in the group look full otherwise. Canadian Pacific and Norfolk offer “idiosyncratic stock-specific stories” that could drive above-peer earnings growth in the long term, contends Jefferies.