Bank of America has raised its rating on Canadian National Railway (NYSE:CNI) shares to ‘Buy’ from ‘Neutral,’ citing improvements in service, volume growth, and an attractive valuation when compared to its peers.
The firm also raised its price target on Canada’s largest freight railway to US$122 from US$117, implying upside from current levels of about US$110.
In a note to clients, Bank of America highlighted that Canadian National is posting stronger-than-expected volume gains. “Revenue ton miles are up 3% Q1 to date versus our 0.5% target, and above CPKC’s 1.2% Q1 to date; carloads were up 1.7%, above our prior 0.2% target,” the analysts wrote.
The bank wrote that these results are ahead of the company’s flat full-year target, supported by record Canadian grain shipments and above-target intermodal and auto volumes.
Service metrics are also showing improvement, with newly appointed COO Patrick Whitehead credited for operational gains.
Bank of America noted that “average velocity is up 6.7% year-year, well ahead of group average 3% increase.” Despite these improvements, Canadian National shares are trading at a discount to peers, the analysts said, suggesting room for upside.
The firm also identified grain and fertilizers as key drivers of volume growth. Revenue ton miles in these categories were up 13% year-over-year, compared to Bank of America’s prior 6% target. Intermodal volumes also exceeded expectations, rising 4% versus the prior -1% target.
However, the analysts cautioned that volume fundamentals could decelerate in the second quarter due to mix impacts, fuel surcharges, and the absence of carbon tax revenues.
Bank of America raised its price target to US$122, reflecting 21.5 times expected 2026 earnings per share, up from 20.5 times previously.
“CN is trading at a 3-turn discount to peers (18x versus peers 21x average) driven by operating misses over the past few years,” they wrote, and noted additional upside potential from the company’s $3 billion buyback program.
Earnings estimates were modestly increased, with first-quarter and full-year 2026 EPS projected at C$1.77 and C$7.80, respectively, up from prior forecasts of C$1.74 and C$7.75.