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Canadian National Railway (TSE:CNR)
TSX:CNR
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Canadian National Railway
(TSX:CNR)
Rating:78Outperform
Price Target:
C$160.00
▲( 10.95% Upside)
Positive Factors
Earnings
Canadian National Railway reported a better-than-expected 1Q EPS of C$1.85, driven by a top-line beat with revenues exceeding assumptions.
Growth Opportunities
Management reiterated its high-single digit adjusted EPS CAGR target for 2024-2026 driven by company-specific growth opportunities, pricing above rail inflation, and continued margin improvement.
Market Share Recovery
Recent volume data suggest that market share appears to have generally recovered to pre-disruption levels.
Negative Factors
Earnings Pressure
The price objective for CNI's shares is lowered to US$107 due to near-term earnings pressure.
Operating Expenses
Operating expenses exceeded estimates, driven mainly by higher-than-expected fuel and equipment rents, impacting profitability.
Short-term Performance
Management noted that blank sailings are creating a bit of an air pocket within international intermodal, which could impact short-term performance.
Canadian National Railway (CNR) vs. iShares MSCI Canada ETF (EWC)
Market Cap
$90.49B
Dividend Yield2.34%
Average Volume (3M)1.29M
Price to Earnings (P/E)20.2
Beta (1Y)0.78
Revenue Growth2.60%
EPS Growth-15.63%
CountryCA
Employees24,911
SectorIndustrials
Sector Strength92
IndustryRailroads
Share Statistics
EPS (TTM)1.85
Shares Outstanding627,500,000
10 Day Avg. Volume1,496,239
30 Day Avg. Volume1,294,119
Financial Highlights & Ratios
PEG Ratio-3.16
Price to Book (P/B)4.06
Price to Sales (P/S)0.00
P/FCF Ratio26.98
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$164.99Price Target Upside14.41% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering17
Canadian National Railway Business Overview & Revenue Model
Company DescriptionCanadian National Railway (CNR) is a prominent North American transportation and logistics company headquartered in Montreal, Canada. As one of the largest rail networks on the continent, CNR operates approximately 20,000 route miles across Canada and the United States. The company provides integrated transportation services that include rail, intermodal, trucking, freight forwarding, warehousing, and distribution. CNR serves a diverse range of industries including petroleum and chemicals, metals and mining, forest products, grain and fertilizers, coal, and automotive products.
How the Company Makes MoneyCanadian National Railway generates revenue primarily through its extensive freight transportation services. The company's key revenue streams include the transportation of bulk commodities such as grain, oil, and minerals, as well as the movement of consumer goods and automotive products. CNR also earns money from its intermodal services, which combine rail and truck transportation to offer flexible shipping solutions. Additionally, the company benefits from long-term contractual agreements with major customers and strategic partnerships with other transportation providers that enhance its service offerings. Ancillary services like warehousing, distribution, and logistics consulting further contribute to CNR's earnings.
Canadian National Railway Financial Statement Overview
Summary
Canadian National Railway demonstrates strong financial health with robust profitability, efficient operations, and solid cash flow generation. The minor fluctuations in profitability do not overshadow the stable financial position and moderate leverage. Consistent revenue growth and effective capital utilization underscore its resilience and capability to sustain future growth.Income Statement
The company exhibits strong profitability with a consistent gross profit margin around 41% and a net profit margin of approximately 26% in TTM (Trailing-Twelve-Months). Revenue growth is stable with a 1% increase in TTM compared to the previous annual period. EBIT and EBITDA margins are robust, reflecting efficient operations. However, recent net income has shown a slight decline, indicating potential cost pressures.85
Very Positive
Balance Sheet
The balance sheet reveals moderate leverage with a debt-to-equity ratio of about 0.98. The return on equity is strong at around 20.8% in TTM, reflecting effective use of equity capital. However, the equity ratio sits at approximately 37.7%, suggesting a balanced but slightly leveraged capital structure compared to total assets.78
Positive
Cash Flow
Cash flow metrics are solid, with a positive free cash flow growth rate of 3.3% in TTM. Operating cash flow to net income ratio is healthy at around 1.5, indicating good cash conversion efficiency. The free cash flow to net income ratio is also positive, suggesting strong cash flow relative to net earnings, supporting future investments and debt repayments.80
Positive
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 17.20B | 17.05B | 16.83B | 17.11B | 14.48B | 13.82B | Gross Profit |
| 7.14B | 6.97B | 7.15B | 7.40B | 6.07B | 5.77B | EBIT |
| 6.39B | 6.25B | 6.60B | 6.84B | 5.62B | 4.78B | EBITDA |
| 8.81B | 8.63B | 9.03B | 9.07B | 7.61B | 7.65B | Net Income Common Stockholders |
| 4.51B | 4.45B | 5.63B | 5.12B | 4.90B | 3.54B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 232.00M | 389.00M | 475.00M | 328.00M | 838.00M | 569.00M | Total Assets |
| 57.40B | 57.07B | 52.67B | 50.66B | 48.54B | 44.80B | Total Debt |
| 21.13B | 21.37B | 18.89B | 15.77B | 12.81B | 13.22B | Net Debt |
| 20.90B | 20.98B | 18.41B | 15.44B | 11.97B | 12.65B | Total Liabilities |
| 35.78B | 36.02B | 32.55B | 29.28B | 25.79B | 25.15B | Stockholders Equity |
| 21.62B | 21.05B | 20.12B | 21.38B | 22.74B | 19.65B |
| Cash Flow | Free Cash Flow | ||||
| 3.25B | 3.15B | 3.78B | 3.92B | 4.08B | 3.30B | Operating Cash Flow |
| 6.75B | 6.70B | 6.96B | 6.67B | 6.97B | 6.17B | Investing Cash Flow |
| -3.56B | -3.61B | -3.47B | -2.51B | -2.87B | -2.95B | Financing Cash Flow |
| -3.81B | -3.62B | -3.41B | -4.67B | -3.86B | -2.71B |
Canadian National Railway Technical Analysis
Neutral
144.21
Price Trends
139.70
Positive
142.66
Positive
147.75
Negative
Market Momentum
2.75
Negative
53.42
Neutral
43.96
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CNR, the sentiment is Neutral. The current price of 144.21 is above the 20-day moving average (MA) of 141.51, above the 50-day MA of 139.70, and below the 200-day MA of 147.75, indicating a neutral trend. The MACD of 2.75 indicates Negative momentum. The RSI at 53.42 is Neutral, neither overbought nor oversold. The STOCH value of 43.96 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for TSE:CNR.
Canadian National Railway Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $90.49B | 20.20 | 21.81% | 2.34% | 2.60% | -15.63% | |
75 Outperform | $102.33B | 24.20 | 7.62% | 0.68% | 19.28% | 8.71% | |
73 Outperform | $6.61B | 3.98 | 132.28% | ― | 0.24% | -23.10% | |
70 Outperform | $1.42B | 11.55 | 15.65% | 1.47% | 16.28% | 239.02% | |
67 Neutral | $24.74B | 9.57 | -10.02% | 0.12% | 1.37% | -9742.41% | |
64 Neutral | $4.39B | 11.81 | 5.20% | 249.39% | 3.96% | -12.36% | |
63 Neutral | $9.97B | 18.82 | 14.78% | 1.98% | 16.00% | -17.63% |
* Industrials Sector Average
Performance Comparison
TSE:CNR
Canadian National Railway
144.21
-26.26
-15.41%
TSE:TFII
TFI International
118.78
-61.88
-34.25%
TSE:CP
Canadian Pacific Kansas City
109.98
1.22
1.12%
TSE:CJT
Cargojet
91.23
-24.03
-20.85%
TSE:AC
Air Canada
18.74
0.33
1.79%
TSE:GFL
GFL Environmental
67.46
24.47
56.92%
Canadian National Railway Earnings Call Summary
Earnings Call Date:May 01, 2025
(Q1-2025)
| % Change Since: 8.94%|
Next Earnings Date:Jul 22, 2025
Earnings Call Sentiment Neutral
The earnings call highlighted strong financial performance and operational resilience despite weather challenges and tariff uncertainties. Growth in certain segments like grain, fertilizers, and coal was offset by declines in intermodal and iron ore shipments. The company remains optimistic about future growth but acknowledges macroeconomic risks.Q1-2025 Updates
Positive Updates
Earnings Growth and Operating Ratio Improvement
CN delivered 8% earnings growth and a 20 basis-point improvement in the operating ratio for the first quarter of Fiscal Year 2025.
Labor Agreement Success
CN successfully concluded the arbitration process involving Canadian conductors and locomotive engineers, resulting in a three-year deal with annual wage increases of 3%.
Record March Performance
In March, CN moved nearly 1.4 billion daily GTMs, among its top performances, with car velocity improving to nearly 200 miles per day.
Strong Grain and Fertilizer Revenue
Revenue for grain and fertilizers increased by 7% due to higher exports from both Canada and the US.
Increased Coal Revenue
Coal exports drove a 9% increase in revenue, with the average length of haul rising by 11%.
Negative Updates
Weather Challenges
Severe winter conditions in February impacted the network, resulting in 19 consecutive days of tier restrictions.
Iron Ore Shipment Decline
Metals and minerals revenues declined by 6%, primarily due to a significant drop in iron ore shipments.
Intermodal Revenue Decline
Intermodal RTMs were flat, but revenue slipped by 3%, attributed to a slow recovery of US volumes.
Increased Tariff Uncertainty
The company acknowledged increased uncertainty around global trade flows and macroeconomic conditions, particularly concerning US-China trade disputes.
Company Guidance
During the recent conference call, CN provided guidance that reflects a strong start to the fiscal year 2025, with an 8% growth in earnings per share (EPS) and a 20 basis-point improvement in the operating ratio for the first quarter. The company maintained its full-year guidance of 10% to 15% EPS growth, despite acknowledging a heightened risk of recession in both Canada and the US. CN anticipates volume growth in the low- to mid-single-digit range, driven by CN-specific initiatives and lapping last year's disruptions, with an expected acceleration in the second half of the year. The company highlighted its ability to adapt to potential changes in trade patterns and emphasized its strategic position at three North American coasts, particularly noting the growth potential at Prince Rupert. Additionally, CN reported a 1% increase in revenue ton miles (RTM) for the quarter, with a focus on operational efficiency and cost management, despite facing weather-related challenges.Canadian National Railway Corporate Events
Stock BuybackDividendsBusiness Operations and StrategyFinancial Disclosures
CN Reports 2024 Results and Sets Positive Outlook for 2025
Neutral
Jan 30, 2025
Canadian National Railway announced its financial results for the fourth quarter and year-end of 2024, reporting a decrease in revenue and earnings compared to 2023. Despite these declines, CN remains optimistic about its growth prospects, projecting a 10%-15% EPS growth in 2025 and planning a C$3.4 billion capital investment. The company also continues its commitment to shareholder returns with a 5% increase in quarterly dividends and a new share repurchase program.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.