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CN Rail, the country's largest rail operator, reported first-quarter earnings per share of $1.18, a more than 31 percent gain from last year. Analysts were expecting $1.03 per share.
Revenue grew at a better-than-expected 12.6 percent, hitting $2.35 billion.
The company's operating ratio -- a measure of efficiency, where a lower number is preferred -- fell to 66.2 percent from 69 percent in the same quarter last year.
CN's results "continue to exemplify the firm's ability to grow revenue at low incremental costs," Raymond James analyst Steve Hansen said in a note to clients. "While the benefits of an atypically warm winter admittedly helped buoy results, the company's underlying operating metrics suggest CN continues to extract solid efficiency and productivity improvements."
Hansen raised his price target to $90 from $87 and hiked his rating to "outperform."
Analysts also say CN Rail is being conservative in its forecast of 10 percent earnings-per-share growth for this year.
"This seems very conservative given the 32-percent EPS growth in Q1/12," Canaccord Genuity's David Tyerman said in a note. "We had a hard time constraining our 2012 EPS forecast to 14 percent, and based on the questions of analysts on the conference call, we believe the consensus view is that management's guidance is likely to be exceeded by a significant margin."
Tyerman raised his price target to $91 and upped his rating on the stock to "buy."
And analyst Benoit Poirier at Desjardins Capital says CN Rail's stock, which has more than doubled since 2009, has more room to run.
"We believe market participants could take a more constructive view on CN in light of the strong 1Q12 results and better outlook," he says. "In addition, we believe that the valuation premium on CN is justified, given its lower exposure to thermal coal compared with U.S. railroads."
He raised his price target to $88 and is maintaining his "buy" recommendation.