Core Insights - Canadian National (CNI) reported quarterly earnings of $1.33 per share, exceeding the Zacks Consensus Estimate of $1.28 per share, and showing an increase from $1.26 per share a year ago, resulting in an earnings surprise of +3.91% [1] - The company generated revenues of $3.02 billion for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.98%, and showing a slight increase from $3.01 billion year-over-year [2] - The stock has underperformed the market, losing about 8.1% since the beginning of the year compared to the S&P 500's gain of 16% [3] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $1.45 on revenues of $3.23 billion, and for the current fiscal year, it is $5.40 on revenues of $12.43 billion [7] - The estimate revisions trend for CNI was unfavorable prior to the earnings release, resulting in a Zacks Rank 5 (Strong Sell) for the stock, indicating expected underperformance in the near future [6] Industry Context - The Transportation - Rail industry, to which CNI belongs, is currently in the bottom 10% of over 250 Zacks industries, suggesting a challenging environment for stocks in this sector [8]

Financial Data and Key Metrics Changes - The company reported a 6% growth in EPS, reaching $1.83 compared to $1.72 in the previous year [27] - Revenues increased by 1% year-over-year, driven by a 1% rise in RTMs and a 5% increase in carloads [21][27] - The operating ratio improved by 170 basis points to 61.4%, compared to 63.1% in the previous year [27] Business Line Data and Key Metrics Changes - Volume growth was approximately 1% in RTMs and 5% in carloads, although overall volumes were softer than expected, particularly in merchandise segments due to macroeconomic and tariff pressures [11][21] - Intermodal volumes increased, with domestic units up 18% and international units up 14% [24] - Petroleum and chemical volumes rose across major segments, with plastics and chemical RTMs up 8% [23] Market Data and Key Metrics Changes - The Canadian grain harvest is expected to be a record crop, despite a slower start [22] - Forest products, particularly lumber, saw a year-over-year decline due to weak demand and increased duties [23] - The company experienced market share gains in chemicals and plastics, with recent successes in domestic intermodal [24][25] Company Strategy and Development Direction - The company is focusing on a capital spend of $2.8 billion for 2026, down nearly $600 million from the current year's level, to address capacity bottlenecks and optimize fleet size [5][20] - There is an emphasis on enhancing shareholder value through increased free cash flow and accelerated share buybacks [7][8] - The company is committed to operational efficiency and productivity improvements, targeting a reduction of $75 million in management labor costs [6][11] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by a weak macroeconomic environment and unexpected shocks from tariffs and labor [4][9] - The outlook for 2026 indicates limited volume growth, with expectations of a weak North American industrial production and housing starts [9][32] - Management expressed confidence in the company's ability to adapt and find growth opportunities despite external challenges [10][66] Other Important Information - The company has seen a 14% increase in free cash flow year-to-date, with expectations for continued acceleration into 2026 [11][31] - The company is actively participating in merger reviews to protect its franchise and competition in the industry [12] Q&A Session Summary Question: Concerns about CapEx cuts and capacity - Management reassured that the capital cuts will not jeopardize capacity, as significant growth opportunities have already been addressed [36][39] Question: Opportunities in commercial strategy for 2026 - Management highlighted a diversified book of business and ongoing efforts to drive market share gains, particularly in energy and agriculture [43][45] Question: Risks associated with M&A activity - Management emphasized that further consolidation may not be beneficial for the industry and expressed readiness to protect their network if necessary [48][51] Question: Challenges in forecasting - Management acknowledged the difficulties in forecasting due to macroeconomic volatility and emphasized the need for agility in responding to changes [56][58]

Financial Performance - Q3 2025 total revenues reached $4.2 billion, a 1% increase compared to Q3 2024 [16, 38] - Diluted EPS grew by 6% to $1.83 in Q3 2025 [15, 16, 52] - The operating ratio improved by 170 bps to 61.4% in Q3 2025 [16, 52] - The company executed $1 billion in share repurchases [54] Operational Efficiency - RTMs (Revenue Ton Miles) increased by 1% in Q3 2025 [15, 16, 38, 54] - Carloads increased by 5% in Q3 2025 [38, 54] - Train length increased by 3% in Q3 2025 compared to Q3 2024 [25] - GTMS/T&E (Train and Engine) employee decreased by 20% in Q3 2025 compared to Q3 2024 [27] Outlook and Strategy - The company reaffirms its full-year EPS guidance, expecting mid-to-high single-digit adjusted diluted EPS growth compared to 2024 [61] - The outlook for 2025 capital expenditures is $3.35 billion, and the 2026 outlook is $2.8 billion, a $550 million reduction [61]

Core Insights - Canadian National Railway reported an increase in third-quarter profit and revenue driven by higher freight volumes transported [1] Financial Performance - The company experienced a rise in profit and revenue in the third quarter [1] - The increase in freight volumes contributed significantly to the financial performance [1]

Financial Performance - Revenues of $4,165 million, an increase of $55 million, or 1% compared to Q3 2024[12] - Operating income of $1,606 million, an increase of $91 million, or 6% compared to Q3 2024[12] - Net income for Q3 2025 was $1,139 million, a 5% increase from $1,085 million in Q3 2024, with diluted earnings per share rising by 6% to $1.83[28] - Free cash flow for Q3 2025 was $793 million, a significant increase of 36% from $584 million in Q3 2024[26] - Total revenues for Q3 2025 were $4,165 million, a 1% increase from $4,110 million in Q3 2024, while total revenues for the nine months ended September 30, 2025 were $12,840 million, also a 1% increase from $12,688 million in the same period of 2024[48] Operating Metrics - Operating ratio improved by 1.7 points to 61.4%[12] - The operating ratio improved to 61.4% in Q3 2025 from 63.1% in Q3 2024, reflecting better cost management[27] - The operating ratio for Q3 2025 improved to 61.4%, down from 63.1% in Q3 2024, and for the nine months ended September 30, 2025, it was 62.2%, compared to 63.6% in the same period of 2024[43] - The company expects continued improvements in operating metrics due to fewer network disruptions and a focus on scheduled operating plans[32] Revenue Breakdown - Revenues for Q3 2025 were $4,165 million, a 1% increase from $4,110 million in Q3 2024, driven by higher volumes and freight revenue per RTM[26] - Freight revenues for Q3 2025 were $3,991 million, a 2% increase from $3,922 million in Q3 2024, while for the nine months ended September 30, 2025, freight revenues were $12,369 million, up 1% from $12,212 million in the same period of 2024[48] - Petroleum and chemicals revenues increased by $15 million, or 2%, in Q3 2025, while revenues for the first nine months increased by $31 million, or 1%[54] - Metals and minerals revenues decreased by $25 million, or 5%, in Q3 2025, and by $64 million, or 4%, in the first nine months of 2025, primarily due to lower volumes[55][58] - Coal revenues increased by $8 million, or 3%, in Q3 2025, and by $34 million, or 5%, in the first nine months of 2025, mainly due to higher volumes[63] Expenses and Costs - Operating expenses for Q3 2025 were $2,559 million, a decrease of $36 million, or 1%, compared to Q3 2024, attributed to lower fuel prices[73] - Fuel expenses decreased by $101 million, or 19%, in Q3 2025, primarily due to lower fuel prices and the elimination of the Canadian federal carbon tax program[77] - The company reported a 20% decrease in fuel expenses for Q3 2025, amounting to $418 million, compared to $519 million in Q3 2024[47] Capital and Investments - The company expects to invest approximately $3.35 billion in its capital program in 2025[21] - Capital expenditures for Q3 2025 totaled $1,105 million, a decrease from $1,176 million in Q3 2024[111] Shareholder Returns - The company repurchased 7.7 million common shares for $1,041 million at a weighted-average price of $134.77 per share in Q3 2025, compared to 2.5 million shares for $427 million at $165.40 per share in Q3 2024[119] - Total dividends paid amounted to $550 million in Q3 2025, up from $532 million in Q3 2024, reflecting an increase in the quarterly dividend rate from $0.8450 to $0.8875 per share[122] Debt and Obligations - As of September 30, 2025, the company had total contractual obligations of $38,943 million, including $21,114 million in debt obligations[123] - The adjusted debt-to-adjusted EBITDA multiple was 2.54 times for the twelve months ended September 30, 2025, compared to 2.51 times for the same period in 2024[128] Risk Factors - The imposition of tariffs by the U.S. administration on imports and retaliatory tariffs by other countries presents significant risks to global trade, potentially impacting demand for rail services[170] Internal Controls and Compliance - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of September 30, 2025[172] - There were no changes in the Company's internal control over financial reporting that materially affected its effectiveness during the third quarter ended September 30, 2025[173]

Core Viewpoint - CN has announced a quarterly dividend of C$0.8875 per common share, which will be paid on December 30, 2025, to shareholders of record as of December 9, 2025 [1] Group 1: Dividend Announcement - The Board of Directors of CN approved a fourth-quarter 2025 dividend [1] - The dividend amount is eighty-eight and three-quarter cents (C$0.8875) per common share [1] - Payment date for the dividend is set for December 30, 2025 [1] Group 2: Company Overview - CN transports over 300 million tons of natural resources, manufactured products, and finished goods across North America annually [2] - The company operates a nearly 20,000-mile rail network connecting Canada's Eastern and Western coasts with the U.S. Midwest and Gulf Coast [2] - CN has been contributing to sustainable trade and community prosperity since its establishment in 1919 [2]

Core Insights - CN reported strong financial results for Q3 2025, with a 6% increase in earnings and an operating ratio improvement of 170 basis points to 61.4% [5][6][19] - The company is focusing on productivity and has set a capital expenditure budget of C$2.8 billion for 2026, a reduction of nearly C$600 million from 2025 [2][5] - CN's net income for Q3 2025 was C$1,139 million, a 5% increase from the previous year, with diluted EPS rising to C$1.83, also a 6% increase [6][19] Financial Performance - Total revenues for Q3 2025 were C$4,165 million, up C$55 million or 1% from Q3 2024 [6][12] - Operating income increased by C$91 million or 6% to C$1,606 million [6][12] - Free cash flow for the first nine months of 2025 was C$2,341 million, a 14% increase from the same period in 2024 [6][27] Operational Metrics - Gross ton miles (GTMs) increased by 1% to 111,901 million, while revenue ton miles (RTMs) also rose by 1% to 57,188 million [6][12] - The company achieved a 2% improvement in fuel efficiency, consuming 0.833 US gallons of fuel per 1,000 GTMs [6][12] - Car velocity improved by 1% to 211 car miles per day, and train length increased by 3% to 8,049 feet [6][12] Shareholder Returns - CN repurchased close to 8 million shares for approximately C$1 billion during the quarter [5][12] - The Board of Directors approved a quarterly dividend of C$0.8875 per common share, payable on December 30, 2025 [7][12] Future Guidance - The company maintains its guidance for 2025, expecting mid-to-high single-digit adjusted diluted EPS growth [8][12] - CN is positioning itself to benefit from higher future volumes while enhancing long-term value for customers and shareholders [2][5]

Core Viewpoint - CN will release its third-quarter 2025 financial and operational results on October 31, 2025, at 7:30 a.m. Eastern Time, followed by a conference call to discuss the results and outlook [1] Group 1: Financial Results Announcement - The financial results will be available at 7:30 a.m. Eastern Time on October 31, 2025 [1] - A conference call will be held at 8:30 a.m. Eastern Time on the same day, led by Tracy Robinson, CN's President and CEO [1] Group 2: Participation Details - Participants can join the call by dialing 1-800-715-9871 (Canada/U.S.) or 1-647-932-3411 (International) with the passcode 4715336 [2] - It is recommended that participants dial in 10 minutes prior to the call [2] - A live webcast of the presentation will be available on CN's investor website, along with supporting slides [2] Group 3: Company Overview - CN transports over 300 million tons of natural resources, manufactured products, and finished goods across North America annually [3] - The company operates a nearly 20,000-mile rail network, connecting Canada's coasts with the U.S. Midwest and Gulf Coast [3] - CN has been contributing to sustainable trade and community prosperity since its establishment in 1919 [3]

Core Insights - Canadian National Railway (CNI) is a significant entity in the North American rail industry, providing freight transportation services across Canada and the United States, and is a competitor to Canadian Pacific Kansas City and Union Pacific [1] - CNI is expected to release its quarterly earnings on October 31, 2025, with analysts estimating an earnings per share (EPS) of $1.28 and projected revenue of approximately $4.15 billion [1][5] - Despite anticipated lower revenues, CNI is expected to report a year-over-year increase in earnings for the quarter ending September 2025, with the consensus estimate aligning with expectations [2] Financial Metrics - CNI has a price-to-earnings (P/E) ratio of approximately 18.04, indicating market valuation of its earnings [3] - The price-to-sales ratio stands at about 4.78, reflecting the company's market value relative to its sales [3] - The enterprise value to sales ratio is around 5.98, suggesting how the company's total value compares to its sales [3] - The enterprise value to operating cash flow ratio is approximately 15.34, indicating the company's valuation in relation to its cash flow from operations [4] - The earnings yield is about 5.54%, providing insight into the return on investment for shareholders [4] - The debt-to-equity ratio is approximately 0.96, showing the proportion of debt used to finance the company's assets relative to shareholders' equity [4] - The current ratio is around 0.82, indicating the company's ability to cover its short-term liabilities with its short-term assets [4]

Core Thesis - Canadian National Railway Company (CNI) is positioned as a long-term compounder in the transportation sector, benefiting from structural advantages that create a natural monopoly and durable pricing power [2][3][5] Structural Advantages - High capital costs, regulatory hurdles, and land rights create significant barriers to entry for competitors, making it nearly impossible for new entrants to disrupt the market [2][3] - Rail transport is the most cost-effective and energy-efficient mode for long-distance freight, further enhancing CNI's competitive edge [2][3] Network and Diversification - CNI's unmatched network spans the Pacific, Atlantic, and Gulf of Mexico, providing a strategic geographic footprint that no other Class I railroad can replicate [3][4] - The company's diversified freight mix, including grain, petroleum, intermodal, and forestry products, reduces reliance on any single commodity, contributing to operational stability [3][4] Financial Performance and Capital Allocation - CNI reported net revenues of $4.27 billion, showcasing its financial strength and operational excellence [4] - The company maintains disciplined capital allocation, supported by robust free cash flow that funds dividends and share buybacks while allowing for reinvestment in infrastructure and technology [3][4][5] Long-term Growth Potential - Structural growth in cross-border trade among the U.S., Canada, and Mexico enhances CNI's long-term positioning in the freight rail sector [3][5] - The combination of pricing power, operational efficiency, strategic reach, and financial durability positions CNI as a resilient and high-quality business for long-term investors [4][5]