Canadian National Railway Co (CNI) Q3 2025 Earnings Call Highlights: Navigating Growth Amidst ...

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EPS: $1.83, up 6% from last year's $1.72. Revenue Growth: Up 1% year-over-year. Operating Ratio: Improved by 170 basis points to 61.4% from 63.1% last year. Volume Growth: 1% increase in RTMs and 5% increase in car loads. Free Cash Flow: Up 14% year-to-date, totaling over $2.3 billion through September. Capital Spend for 2026: Set at $2.8 billion, down nearly $600 million from this year. Share Buyback: Approximately 8 million shares repurchased for over $1 billion. Fuel Expense: Decreased 20% year-over-year. Labor Costs: Increased 2% due to higher incentive compensation and wage inflation. Productivity Improvements: Training engine labor productivity improved 20% year-over-year.

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Release Date: October 31, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

Canadian National Railway Co (NYSE:CNI) achieved a 6% growth in EPS and an operating ratio improvement of 170 basis points to 61.4% in Q3. The company has announced a reduction in capital spend for 2026 to $2.8 billion, down nearly $600 million from this year's level, which is expected to enhance free cash flow. CNI has been successful in increasing productivity, with training engine labor productivity improving by 20% year over year. The company has accelerated its share buyback program, taking close to 8 million shares out of circulation for just over a billion dollars. CNI's network continues to perform well, with car velocity at 211 miles per day and local service commitment performance at 95%.

Negative Points

CNI faced challenges in predicting the volume environment, with lower volumes preventing full earnings growth as forecasted. The company is experiencing macroeconomic headwinds, including the impact of tariffs and a weak outlook for North American industrial production and housing starts. Safety metrics have seen a year-to-date increase in reportable injury and accident ratios by 4% and 14% respectively. Forest products, especially lumber, saw a year-over-year decline due to weak demand and increased duties. CNI's guidance handling over the past two years has been a pain point for shareholders, with the company acknowledging the need for improvement.

Q & A Highlights

Q: Can you provide more details on the CapEx cut and its impact on capacity and growth opportunities? A: (Stacy Alderson, Assistant Vice-President, Investor Relations) The CapEx cut is primarily due to the completion of capacity expansion projects and locomotive upgrades. The network is now well-positioned for current volumes, especially in the western part of our network. We have built enough capacity to accommodate growth and improve resilience and reliability. The focus is now on pulling back capital to the proper level for next year.

Story Continues

Q: How do you plan to re-energize CN's commercial strategy and tackle volume growth in 2026? A: (Tracy Robinson, President and CEO) While the macroeconomic environment remains challenging, we are focusing on areas of strength such as the energy sector and industrial products. Janet Drysdale is driving a boots-on-the-ground approach, competing for every opportunity and collaborating with customers. We are seeing recent share gains in domestic intermodal and other segments.

Q: What are your thoughts on M&A activity and its potential impact on CN? A: (Tracy Robinson, President and CEO) We believe the industry does not need a merger to provide better service. More cooperation and less regulation are needed. If a merger occurs, we will protect our network and position it to drive growth. We are optimistic about our long-term growth prospects, given our network's strategic position.

Q: How are you addressing forecasting challenges in a volatile environment? A: (Janet Drysdale, Interim Chief Commercial Officer) Forecasting is difficult, especially point forecasting. We aim to provide more range-based guidance and share potential upside and downside factors. Our focus is on agility and responding to changes in volumes, while maintaining close relationships with customers.

Q: Can you discuss the impact of management changes on CN's operational strategy? A: (Patrick Whitehead, Senior Vice President, Network Operations) The dual COO structure was effective, but it's time to consolidate. The strategy remains unchanged, focusing on safety, service, productivity, and cost. We are building on what's working and aiming for best-in-class consistency. The focus is on tightening yard dwell times and improving car utilization.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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