Wednesday’s analyst upgrades and downgrades

Wednesday’s analyst upgrades and downgrades DAVID LEEDER PUBLISHED 50 MINUTES AGO UPDATED 2 MINUTES AGO COMMENTS SHARE SAVE FOR LATER Listen to this article Learn more about audio Log in or create a free account to listen to this article. Inside the Market’s roundup of some of today’s key analyst actions National Bank Financial analyst Cameron Doerksen sees both Canadian National Railway Co. (CNR-T +1.96% increase ) and Canadian Pacific Kansas City Ltd. (CP-T +1.45% increase ) poised to benefit from “solid” volume growth thus far in the third quarter with new cross-border tariffs representing “a small incremental headwind,” while U.S. trade policy “helping other volumes.” “The collapse of trade talks between Canada and the U.S. and the subsequent new U.S. tariffs/restrictions and Canadian counter-tariffs on a range of goods is an incremental headwind for cross-border volumes (autos, metals, forest products among the categories impacted),” he explained. “However, the direct impact on both rails is likely to be limited as existing tariffs were already impacting certain cross-border volumes and bulk commodities are largely unaffected. Nevertheless, ongoing trade uncertainty is an impediment to business investment and economic growth, especially in Canada. For CN, 29 per cent of its revenue is tied to transborder Canada-U.S. flows while CPKC’s U.S.-Canada exposure sits at 21 per cebt of total revenue. “We also highlight that tariffs have in some cases altered trade flows, which act as a revenue offset for the rails. For instance, tariffs on autos has resulted in more imports into Canada from countries other than the U.S., which for the rails can mean a longer length of haul driving more revenue (CN a notable beneficiary given its strong international auto import franchise).” Thus far in the quarter, CN has seen revenue ton miles (RTMs) rise 4.6 per cent year-over-year, according to Mr. Doerksen, with CPKC seeing a 6.4-per-cent increase. “Grain [is] continuing to be a key driver (although ... a smaller Canadian harvest this crop-year will be a volume headwind over the next 12 months),” he added. “With overall volumes largely in line with our expectations, we have made mostly minor adjustments to our full-year forecasts for CN and CPKC (fuel surcharge lag will be a modest headwind to EPS in Q3 relative to prior expectations).” In a client note, Mr. Doerksen said continue to have a “slight preference” for CPKC over CN from an investing…