Tuesday’s TSX breakouts: This industry leader is on track for steady earnings and dividend growth

The number of stocks on the positive breakouts list (stocks with positive price momentum) is now up to 97 companies as the S&P/TSX composite index staged its eighth day of consecutive gains on Monday.

The list of positive breakouts remains concentrated in resource stocks with 30 per cent of the stocks with positive price momentum from the energy sector, and gold and silver stocks representing approximately 20 per cent. However, the list is broadening out to stocks levered to global economic growth, such as Canadian National Railway Co. (CNR-T), which is discussed below.

A brief outline is provided that may serve as a springboard for further fundamental research.

The company

CN Rail is an industry leader, operating a rail network across the country and down to the Gulf coast of the United States.

On Jan. 26, the company reported better-than-expected fourth-quarter results after the market closed. Earnings per share came in at $1.18, above the consensus forecast of $1.11, and the stock price moved marginally higher, up just 0.6 per cent the following day.

Claude Mongeau, the company's chief executive officer, provided a cautious outlook stating, "Although the economic environment remains challenging, CN will continue to leverage its franchise strength and industry-leading efficiency. For 2016, the Company expects to deliver mid-single digit EPS growth."

Dividend policy

Management remains committed to its dividend. In January, the company announced a 20 per cent hike in its quarterly dividend, raising it to 37.5 cents per share from 31.25 cents per share. On a yearly basis, this amounts to $1.50 per share, equating to an annualized yield of 1.9 per cent.

Valuation

The stock is trading at a price-to-earnings multiple of 17.1 times the 2016 consensus estimate. According to Bloomberg, shares of CN Rail are trading at discount to its three-year historical average of 18.4 times, and relatively in-line with its five-year historical average of 17.2 times.

Analysts' recommendations

According to Bloomberg, there are 12 buy recommendations and 15 hold recommendations. There are no sell recommendations. The average one-year price target is $81.38, suggesting that the share price is nearly fully valued.

The consensus earnings per share forecast is $4.67 in 2016, up from $4.44 in 2015, and forecast to rise nine per cent to $5.11 in 2017.

Chart Watch

Over the last year, the share price has been trading sideways, consolidating largely between $70 and $80.

The stock's next resistance level is around $80, then around $83 and after that around $85. There is downside support around $76, close to its 200-day moving average ($76.18). Failing that, there is support at $75.50, near the stock's 50-day moving average ($75.52), and there is large support at $70.

The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a stock to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a stock appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.

Below is a list of stocks in the S&P/TSX composite index and the S&P/TSX Small Cap index that are technically breaking out, reaching new 55-day highs or lows. Stocks on the positive breakouts list have displayed positive price momentum during this period. Stocks on negative breakouts list have experienced negative price momentum.