Canadian National Railway NYSE: CNI executives said the company delivered a “solid quarter” in the first quarter, pointing to improved operating performance, higher free cash flow, and volume growth in key markets, while also acknowledging a setback in safety results.
Management says results were “in line with plan” as operating metrics improved
President and CEO Tracy Robinson said the quarter reflected the company’s focus on “execution and performance across the entirety of our operations,” adding that CN is “doing exactly what we said we would do at the outset of the year.” Robinson said CN leaned into workforce productivity, asset utilization, and operating efficiency, and that “all of our key operating metrics improved year-over-year,” contributing to what she described as a “structurally improved cost base.”
Chief Operating Officer Pat Whitehead detailed the operating improvements versus the first quarter of 2025, citing “car velocity up 6%, dwell down by 4%, and train speed up 6%.” He said local service commitment improved 1% and CN ran “longer and heavier trains by 2%,” helping the railroad move “3% more GTMs.” Whitehead also pointed to resource efficiency gains, including “T&E productivity…up 12%” and “T&E labor costs per GTM…down 7%,” along with “locomotive productivity…up 8%” and locomotive availability of 91%.
Whitehead said CN’s “Fast Track” cross-functional reviews are intended to further improve operations and resourcing, and that the company is about a third of the way through major terminals, with work expected to continue through the summer.
Safety results worsened; incident costs weighed on expenses
Robinson said safety was the one area where CN was “not satisfied” in the quarter, noting the company “fell short of our expectations” after years of consistent improvement. Whitehead said accidents were up year-over-year and that while the comparison was against “last year’s exceptionally low levels,” CN is treating the increase seriously. He said there was “no single underlying cause,” citing incidents related to wheels, track conditions, and “in one instance, a landslide impacted a train.”
Chief Financial Officer Ghislain Houle said other expenses rose by about CAD 50 million, with “over CAD 30 million of that driven by higher than expected incident costs.” Houle said he was “very confident” incident costs would come down as the year progresses, adding that the first quarter is “always a bit tougher on safety because of the snow and because of the ice.”
Revenue fell 1%, while volumes rose; grain and NGL were standout contributors
Chief Commercial Officer Janet Drysdale said first-quarter revenues declined 1% year-over-year, but increased 2% when adjusted for foreign exchange and rose 3% when adjusted for foreign exchange, fuel surcharge, and the Canadian carbon tax. She said revenue ton-miles increased 3% and carloads increased 2%, though mix was a headwind that offset same-store price.
Drysdale reiterated CN’s pricing approach: “Price to the value of our service, sell into our capacity, and price ahead of our rail cost inflation.” She said the company converted about CAD 100 million in revenue in the quarter from its “boots on the ground pipeline,” with wins across segments including “plastics, asphalt, fertilizers, aggregates, scrap steel, and steel billets.”
Among the quarter’s strongest segments, Drysdale highlighted grain performance, saying CN delivered “record shipments of Western Canadian grain” supported by service and “grain car cycle times that were 15% better than the prior year.” She also said CN benefited from “the reduction of Chinese tariffs on canola,” while U.S. grain growth was driven by “a strong soybean program following the agreement between the U.S. and China.”
Energy-related volumes also grew. Drysdale said CN delivered a “16% increase in NGL RTMs,” driven by weather-related propane demand, strong exports through Prince Rupert, and the ability to capture spot butane shipments. She also cited refined products growth, including CN’s “first unit train into the phase two expansion of the Toronto fuel terminal.”
Intermodal results were described as solid, helped by the Gemini service at Prince Rupert and “service-related gains in domestic.” However, Drysdale said results were more challenged in metals and minerals due to reduced gas drilling in Western Canada impacting frac sand demand, while steel and aluminum remained affected by tariffs. Forest products continued to face weak lumber demand and the effects of tariffs and duties, and coal volumes declined due to “unfavorable market conditions for thermal exports.”
EPS and free cash flow: gain on asset sale and advisory fees were key adjustments
Houle said reported diluted EPS was CAD 1.87, up 1% from last year. Adjusted diluted EPS was CAD 1.80, down 3% year-over-year, or CAD 1.83, down 1% on an exchange-adjusted basis. He cited two notable adjustments: a CAD 66 million pre-tax gain from the sale of the Newmarket Subdivision and CAD 17 million in advisor fees related to industry consolidation.
Houle also pointed to year-over-year items not reflective of underlying performance, including a higher effective tax rate and last year’s remeasurement of CN’s investment in Iowa Northern, which he said negatively impacted adjusted EPS by CAD 0.06. Robinson said fuel and foreign exchange combined to reduce earnings by CAD 0.07 in the quarter.
Management repeatedly emphasized cash generation. Houle said CN generated around CAD 900 million of free cash flow in the quarter, about CAD 275 million higher than last year, driven by lower capital expenditures, the Newmarket disposal proceeds, and higher net cash from operating activities. Robinson said CN repurchased 6 million shares and increased leverage to 2.7 times, calling it a reflection of confidence in CN’s underlying earnings power.
Houle said CN expects leverage to remain around that level through 2026, before returning to 2.5 times in 2027. On costs, he said labor was up 1% (general wage increases largely offset by 4% lower headcount). Fuel expense was more than CAD 10 million lower year-over-year, helped by the removal of the carbon tax in Canada and record fuel efficiency, partially offset by higher fuel prices.
Guidance maintained; fuel volatility and trade uncertainty remain watch items
Houle said CN is maintaining its “directional guidance of flattish volumes with earnings slightly exceeding volume growth for 2026,” noting heightened uncertainty since the company’s January call. He said CN updated its view of WTI to $80-$110 per barrel (from $60-$70) due to volatility, and updated its FX assumption to $0.73 from $0.715. He said the effective tax rate remains expected in the 25% to 26% range.
On second-quarter seasonality, Houle said the “dark cloud” is fuel. If fuel prices remain elevated, he said it could pressure the operating ratio by more than 200 basis points and reduce EPS by about CAD 0.02 in the quarter. He also said that if prices stayed where they are, fuel could become “about CAD 0.15 of tailwind in the second half of the year,” though CN is not assuming that benefit in its guidance given volatility.
Drysdale said visibility remains limited and cited several moving pieces across segments, including tougher year-over-year comparisons for international intermodal in the second quarter and a potash terminal shutdown shifting into the second quarter. She also said grain’s record first quarter likely included some pull-forward.
Robinson addressed trade uncertainty, saying CN has assumed “nothing will change” around USMCA and broader tariff discussions because “it’s the only thing we can assume,” while adding she believes the agreement is important to both Canada and the U.S. She said CN will stay close to the process and to customers as they adjust plans.
In response to questions about rail industry consolidation, Robinson said CN was “eager to see” an updated merger application expected the following day and reiterated CN’s position that any proposal must meet a “high bar” to demonstrate it is in the public interest and enhances rail competition. She said CN believes “remedies will be required, and considerable remedies.”
Closing the call, Robinson said CN was “very happy with the quarter,” citing strong operating performance, growing productivity, commercial wins enabled by service, and improved free cash flow. “This engine is running well,” she said, adding CN is positioned to capture operating leverage “if and as the economy recovers.”
About Canadian National Railway NYSE: CNI
Canadian National Railway Company NYSE: CNI is a Class I freight railway that operates an integrated rail network across Canada and the United States. Headquartered in Montreal, Quebec, CN provides long-haul freight transportation and related logistics services that connect major ports, industrial centers and inland markets throughout North America. Its transcontinental system enables cross-border movement of goods and supports supply chains that span coast-to-coast in Canada and into the central and eastern United States.
CN's core business is the railborne transportation of a broad mix of commodities, including intermodal container traffic, forest and paper products, grain and other agricultural products, metallurgical and industrial products, petroleum and chemical products, coal and automotive shipments.
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