Q: I understand CNR stock can be recession sensitive. It has gone down somewhat - would you say this is a buy here or would you be holding for more downside or waiting to see if we head into a recession? What would be a good price target to buy in for a long term hold? Thanks so much.
5i Research Answer:
CNR is trading at 18.6x Forward P/E. Valuation has gone down to attractive levels compared to peers (CP) and its historical averages which range from 17.5x to 22.5x in the last few years. We think the recent slowdown in economic activity already affected the volume of the transportation industry (rail and truck), given where it is trading today, we would be okay to add to CNR at the current valuations and would be willing to average into the position if it drops more from here. The decline likely reflects labour unrest as well as economic concerns. But we think $145 would be a good entry price to start being more aggressive.