Critical Analysis: Canadian National Railway (NYSE:CNI) and Heartland Express (NASDAQ:HTLD)

Canadian National Railway (NYSE:CNI) and Heartland Express (NASDAQ:HTLD) are both industrials companies, but which is the superior business? We will contrast the two companies based on the strength of their institutional ownership, risk, dividends, profitability, analyst recommendations, earnings and valuation.

Profitability

This table compares Canadian National Railway and Heartland Express’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Canadian National Railway	26.92%	22.22%	8.12%
Heartland Express	-2.98%	-0.92%	-0.58%

Dividends

Canadian National Railway pays an annual dividend of $2.60 per share and has a dividend yield of 2.1%. Heartland Express pays an annual dividend of $0.08 per share and has a dividend yield of 0.8%. Canadian National Railway pays out 46.1% of its earnings in the form of a dividend. Heartland Express pays out -28.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Canadian National Railway has increased its dividend for 3 consecutive years. Canadian National Railway is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation and Earnings

This table compares Canadian National Railway and Heartland Express”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Canadian National Railway	$12.38 billion	5.90	$3.38 billion	$5.64	21.51
Heartland Express	$805.71 million	0.99	-$52.45 million	($0.28)	-36.68

Canadian National Railway has higher revenue and earnings than Heartland Express. Heartland Express is trading at a lower price-to-earnings ratio than Canadian National Railway, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Canadian National Railway and Heartland Express, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Canadian National Railway	0	10	9	0	2.47
Heartland Express	3	4	0	0	1.57

Canadian National Railway presently has a consensus target price of $137.49, indicating a potential upside of 13.32%. Heartland Express has a consensus target price of $12.40, indicating a potential upside of 20.74%. Given Heartland Express’ higher probable upside, analysts clearly believe Heartland Express is more favorable than Canadian National Railway.

Risk and Volatility

Canadian National Railway has a beta of 0.96, meaning that its share price is 4% less volatile than the S&P 500. Comparatively, Heartland Express has a beta of 1.35, meaning that its share price is 35% more volatile than the S&P 500.

Institutional & Insider Ownership

80.7% of Canadian National Railway shares are held by institutional investors. Comparatively, 53.4% of Heartland Express shares are held by institutional investors. 2.4% of Canadian National Railway shares are held by company insiders. Comparatively, 41.6% of Heartland Express shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Canadian National Railway beats Heartland Express on 12 of the 16 factors compared between the two stocks.

About Canadian National Railway

Canadian National Railway Company, together with its subsidiaries, engages in the rail, intermodal, trucking, and marine transportation and logistics business in Canada and the United States. The company provides rail services, which include equipment, custom brokerage services, transloading and distribution, business development and real estate, and private car storage services; and intermodal services, such as temperature controlled cargo, port partnerships, and logistics parks. It offers trucking services, such as door-to-door services, import and export dray, interline services, and specialized services, comprising flatbed trucks, on-deck mobile transport trays, expedited cargo, and permit/overweight services; and supply chain services. It serves automotive, coal, fertilizers, temperature controlled cargo, forest products, dimensional, grain, metal and minerals, petroleum and chemicals, consumer goods, and third party logistics applications. The company operates a rail network of approximately 20,000 route-miles of track and shipping spanning. Canadian National Railway Company was incorporated in 1919 and is headquartered in Montreal, Canada.

About Heartland Express

Heartland Express, Inc., together with its subsidiaries, operates as a short-to-medium, and long-haul truckload carrier in the United States and Canada. It primarily provides nationwide asset-based dry van truckload service for shippers; cross-border freight and other transportation services; and temperature-controlled truckload services. The company offers its services under the Heartland Express and Millis Transfer brand names. It primarily serves retailers and manufacturers in consumer goods, appliances, food products, and automotive industries. The company was founded in 1978 and is headquartered in North Liberty, Iowa.