Canadian National Railway Company (NYSE:CNI) FY Conference Transcript

Summary of Canadian National Railway Company (CNI) FY Conference Call Company Overview - Company: Canadian National Railway Company (NYSE:CNI) - Date of Conference: February 17, 2026 Key Points Industry and Market Context - The freight transportation industry is currently experiencing a four-year freight recession, which is unprecedented [21] - Macroeconomic growth is expected to be weak in 2026, with uncertainty surrounding trade flows due to the renewal of the USMCA [10] Financial Performance - 2025 Performance: - 14% EPS growth in Q4, the best in the industry, and 7% growth for the year on 1% volume growth [9] - 8% growth in free cash flow and a 250 basis point improvement in operating ratio in Q4 [10] - 2026 Expectations: - Anticipated solid Q1 performance despite difficult operating conditions [13] - Focus on generating free cash flow growth and returning it to shareholders [11] Operational Strategies - Emphasis on productivity improvements and a reset of the capital program [9] - The company is focused on controlling costs and improving operational efficiency, with a leaner and more productive network [12][46] - The "Boots on the Ground" program aims to enhance commercial presence and customer service [11] Growth Opportunities - Significant growth potential exists in sectors such as energy, agriculture, and mining, leveraging the company's strategic network [23][25] - The company is well-positioned to capitalize on North America's natural resource base, regardless of trade flow uncertainties [12] Challenges and Risks - Non-recurring headwinds include unfavorable traffic mix, capital credit impacts, and currency fluctuations [11] - The impact of tariffs, particularly on steel, aluminum, and forest products, has been significant, costing approximately $350 million last year [56] - Uncertainty regarding the impact of the UP-Norfolk Southern merger on competition and market dynamics [31] Leadership and Management - The current leadership team is viewed positively, with strong alignment around operational plans and strategies [29] - Recent turnover in executive positions is seen as a natural evolution, with a focus on maintaining strong operational execution [27] Technological Advancements - The company is exploring AI applications to enhance operational efficiency, particularly in train operations and infrastructure inspections [48][49] - AI is expected to transform business processes and improve predictive capabilities [49] Capital Allocation - Priorities for capital spending include maintaining operational capacity and ensuring consistent dividend growth [42] - The company plans to redirect capital back to shareholders as capital expenditures grow [42] Pricing Environment - The company aims to achieve pricing growth above inflation, despite challenges from tariffs and market conditions [58] - Domestic intermodal services are growing, supported by strong service performance [57] Long-term Outlook - The company is poised for significant operating leverage and earnings growth as market conditions improve [60] - Anticipated mid-single-digit volume growth with a lean cost structure could lead to outsized EPS growth [26] Conclusion Canadian National Railway Company is navigating a challenging freight environment while focusing on operational efficiency, strategic growth opportunities, and shareholder returns. The leadership is optimistic about future growth potential, particularly in energy and resource sectors, despite current market uncertainties and tariff impacts.