Canadian National Railway Co. has received an analyst upgrade from BMO Capital Markets amid high consumer demand for goods.

In a note to clients Wednesday, analyst Fadi Chamoun said CN’s shipping volumes have been stronger than expected, leading him to increase his earnings estimates for the railroad operator.

“Service data and volume trends have been very encouraging since early March,” he said.

He raised his recommendation on the rail operator to outperform (the equivalent of a buy) from a market perform rating (the equivalent of hold). He maintained his 12-month price target at $170.00 per share, implying a roughly 15 per cent gain from where the stock is currently trading.

However, he said he sees a scenario where CN’s stock price could rise to as much as $200 per share if “the demand environment remains favourable.” 

“After several years of underwhelming performance, we see a renewed effort by management to improve operating efficiency and [return on invested capital]. Realizing the full potential of the franchise could support a strong share price from current levels, albeit visibility into execution on this opportunity is limited,” he said.

CN’s newly-appointed Chief Executive Officer Tracy Robinson said in the company’s latest earnings release in April that restoring its network to full capacity and improving efficiency are top priorities. During an investor conference on Tuesday, Robinson highlighted how the railroad was seeing early signs that grain and coal shipping volumes will be stronger-than-expected in the coming quarters.

Chamoun said he believes these efforts will shield CN despite the increased risk of a recession and the potential for softening consumer demand.

“We believe that [CN's] self-help opportunity will defend the earnings power in a scenario of weaker demand limiting the downside from current level while the upside scenario is very attractive,” he said.