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Railways are chugging Add to ...

Canadian rail stocks have sure been enjoying a good winning streak. Canadian National Railway Co. has risen for four straight days (Thursday included, although the trading day isn't over yet). Canadian Pacific Railway Ltd. has risen for eight straight days.

The two companies report their second quarter results later this month (CNR on July 22; CP on July 28), and at least one analyst is feeling upbeat, particularly about CNR. Tasneem Azim, an analyst at UBS, boosted her earnings expectations for the railway to $1.03 from 92 cents previously - putting her estimate considerably higher than the 98 cents a share expected by the consensus among analysts.

In other words, she's looking for a big beat here, due to better-than-expected volume growth. However, Ms. Azim is sticking to a "neutral" recommendation on the stock, with a 12-month price target of $67.

As for CP, she believes the railway will report earnings of 74 cents a share. While she also has a "neutral" recommendation on the stock (with a target of $66), she actually prefers CP over CNR longer term because of its superior earnings growth relative to its share price.

"Also, in the context of a gradual global economic recovery, we believe CP is positioned well in terms of its exposure to global markets and its strong share in growing categories which, coupled with cost reductions, should allow it to drive sector leading [earnings per share]growth," she said in a note.

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