Canadian National Railway NYSE: CNI raised its 2026 outlook after reporting second-quarter earnings growth, higher volumes and what management described as improved productivity across its network.
President and Chief Executive Officer Tracy Robinson said the company delivered 12% exchange-adjusted earnings-per-share growth on 5% volume growth during the quarter. CN now expects low-single-digit growth in revenue ton miles for 2026 and mid- to high-single-digit adjusted diluted EPS growth, compared with its prior assumption for roughly flat volumes.
“The engine's running well,” Robinson said, citing operating execution, commercial activity, cost discipline and capital management. She said the company expects year-over-year comparisons to become more difficult in the fourth quarter, particularly because it is lapping record grain performance from the prior year.
Second-quarter financial performance
Chief Financial Officer Gilles Lelièvre said reported diluted EPS totaled C$2.06, up 10% from a year earlier. Adjusted diluted EPS was C$2.08, up 11%, or C$2.09 on an exchange-adjusted basis, representing 12% growth. The results included a C$17 million adjustment for advisory fees related to industry consolidation.
Revenue rose 11% year over year as RTMs increased 5%, according to Chief Commercial Officer Janet Drysdale. CN reported an adjusted operating ratio of 62.2%, compared with 61.7% a year earlier. Lelièvre said higher fuel prices had a 210-basis-point unfavorable effect on the operating ratio.
Year-to-date free cash flow increased about 20%, or roughly C$300 million, driven by stronger earnings, disciplined capital spending and working-capital management, partly offset by higher tax payments. CN ended the quarter with leverage of 2.6 times and maintained its target of 2.7 times adjusted debt to adjusted EBITDA for 2026.
On an exchange-adjusted basis, labor expense increased 3%, reflecting wage increases and about C$40 million more in incentive compensation, partly offset by a 5% reduction in average headcount. Fuel expense increased about C$250 million from the prior-year period because of higher prices, while purchased services and materials rose 11%, including advisory costs and higher trucking and vessel costs associated with volume growth.
Productivity and network operations
Chief Operating Officer Pat Whitehead said CN moved 3% more gross ton miles while using existing assets and capacity more efficiently. Locomotive productivity improved about 6%, employee productivity improved about 9%, and train-and-engine employee productivity increased about 13%. Average train length rose approximately 1%.
CN also reported its best second-quarter and first-half fuel-efficiency performance in its history. Whitehead said the company improved efficiency through train handling, locomotive utilization and operating practices while maintaining transit-time performance.
The company’s Fast Track continuous-improvement program generated close to C$100 million in realized benefits so far this year, Whitehead said. The review of an initial group of major terminals has largely been completed, while work continues at intermodal terminals, network operations centers and other areas including purchased services and facilities.
Whitehead said car velocity and network train speed were largely flat year over year despite higher volumes, while metrics improved during the quarter after being affected by the end of winter conditions in April. In Western Canada, CN handled record grain volumes alongside higher refined petroleum products, potash and natural gas liquids, while car velocity, train speed and dwell each improved by roughly 3%.
CN is monitoring active wildfires in Northern Ontario and British Columbia. Whitehead said the company’s main line through Northern Ontario was open and management did not expect a significant effect on the business, though it had experienced some traffic bunching during a shutdown.
Commodity trends and second-half outlook
Drysdale highlighted record second-quarter volumes for Western Canadian grain and potash, as well as strong U.S. grain movements. Petroleum and chemicals RTMs rose 11%, supported by increased long-haul refined-product shipments from Western to Eastern Canada, growth into the Greater Toronto Area fuel terminal and higher NGL exports through Prince Rupert.
Metals volumes increased 11% despite tariffs on steel and aluminum, as CN worked with customers on supply-chain changes, according to Drysdale. Domestic intermodal also grew, while overseas intermodal volumes rose sequentially but declined from a year earlier due to difficult comparisons with tariff-related volume pull-forwards in the prior year.
- CN expects grain strength to be a principal driver of third-quarter RTM growth.
- Management expects continued momentum in refined products, new crude business and NGL exports.
- Domestic intermodal is expected to remain strong, while overseas intermodal is expected to weaken in the second half, partly due to the demarketing of certain low-profitability Port of Vancouver shipments.
- Automotive share gains and offshore imports into Canada are expected to offset generally flat production.
- Canadian coal volumes will depend on mine production and operating conditions, while U.S. export demand remains supportive.
Union Pacific agreements expand market access
Robinson also discussed two agreements announced with Union Pacific. A commercial agreement, which is effective once definitive documentation is completed and is not contingent on a merger, gives CN rights for Canada-to-Mexico traffic through Memphis and direct access to Ferromex. CN said the arrangement extends its length of haul from Chicago to Memphis and creates opportunities for northbound and southbound traffic across commodities, including automotive, intermodal, agriculture, energy and chemicals.
In return, Union Pacific will receive rights to additional capacity on CN’s EJ&E line for U.S. traffic. Robinson said CN will retain control over capacity and Union Pacific would fund any required expansion tied to its volumes.
A separate settlement agreement, contingent on Surface Transportation Board approval and closing of the proposed Union Pacific merger, would provide CN access to Kansas City and use of Union Pacific’s NEF yard. CN said it identified five “two-to-one” customers under the agreement, with additional “three-to-two” opportunities expected to evolve through the regulatory process.
CN agreed not to oppose the merger, saying the agreements had largely addressed its concerns while creating new growth opportunities. Robinson said the company would still participate if questions arise concerning its agreements with Union Pacific.
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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