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Canadian National RailwayDOUG WOJCIK

Canadian National Railways Co. should once again outperform its North American peers if the economy suffers a double dip recession, an industry analyst said Friday.

Walter Spracklin of RBC Capital Markets says CN is the "flight to quality" name within the transportation sector because its shares outperformed the sector during the last recession in 2008.

The Montreal-based railway "consistently and materially" beat other Class 1 railroads, the S&P Rail index and the overall S&P index three years ago.

Shares of the other railroads fell more and recovered less during the recovery, he wrote in a report.

"What this means is that if history repeats itself, investors buying CN today would be better off by the end of a potential recession as compared to investing in other Class 1 rails."

Spracklin says the performance of Canada's largest railway reflects the reliability of its operations, significantly higher free cash-flow generation and a "stickier" Canadian investor base.

The latest results show industry freight volumes have remained flat for the second week in a row.

Carloads fell 2.5 per cent in a week, thanks to a decrease in shipments of agricultural products and a rare drop in intermodal volumes.

Trains also travelled slower and spent more time in terminals.

Spracklin says the downside potential for Canadian railroads is considerably less than U.S. rivals, should the economy move into a double-dip recession that would be expected to be less severe than 2008.

However, he says Canadian railways, including Canadian Pacific Railway Ltd. would see less upside than U.S. carriers if a crisis is averted.

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