Deutsche Bank analyst Seldon Clarke downgraded Canadian National Railway (CNI) to Hold from Buy with a price target of $90, down from $94. The analyst sees limited earnings growth potential and a "stretched" valuation. Clarke believes Canadian National's earnings growth will be constrained by limited operating leverage and he sees better opportunities for growth at both Canadian Pacific (CP) and Union Pacific (UNP).
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Citi analyst Christian Weatherbee lowered the firm's price target on Canadian National to $132 from $140 and keeps a Buy rating on the shares. The analyst downgraded three stocks in U.S. rails and lowered estimates across the board for the group. He sees near-term risk in a decelerating freight and economic environment and notes that rail valuations have actually improved relative to the market while earnings growth expectations are at their highest. A more cautious approach is warranted given "freight warning signs" and "persistent" service issues, Wetherbee tells investors in a research note. He believes these can result in a "delayed operational reaction to a true downturn."