Off The Rails? Not Quite.

Core Viewpoint - Canadian National Railway Company (CNI) continues to demonstrate resilience and strategic growth despite facing significant headwinds, including labor uncertainties and operational disruptions, which have led to a revision of its full-year EPS growth guidance [23][33]. Financial Performance - In Q2 2024, CNI reported a 7% increase in revenues, driven by stronger pricing, higher volumes, and favorable exchange rates, although this was partially offset by lower fuel surcharges due to decreased oil prices [32][34]. - The company achieved record volumes through the Vancouver corridor, with local service commitment reaching 94%, up from 91% in the previous year [7][34]. - Adjusted diluted EPS for Q2 was $1.84, reflecting a 5% increase compared to the previous year, despite higher costs impacting the operating ratio, which rose by 160 basis points to 62.2% [17][34]. Operational Insights - CNI's operational efficiency remains solid, particularly in the East and South regions, although challenges in the Western region due to maintenance work impacted overall performance [6][8]. - The company is negotiating with labor unions to mitigate potential work stoppages, which have already affected international intermodal volumes as customers rerouted vessels away from Canadian ports [9][10]. Strategic Initiatives - CNI is focusing on growth initiatives, including expanding its petroleum and fuels business and enhancing its international portfolio [6][34]. - The company is leveraging opportunities in energy, agriculture, and international intermodal sectors, with intermodal revenues up 6% and a 19% increase in international traffic through Western gateways [26][29]. Future Outlook - The full-year EPS growth guidance has been revised to mid- to high single-digit growth, down from previous expectations of double-digit growth [11][34]. - Despite current challenges, CNI aims for a 10% to 15% compound annual growth rate from 2024 to 2026, indicating confidence in its long-term financial outlook [17][34].