Canadian National Railway Company ((TSE:CNR)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Canadian National Railway Company (CN) painted a picture of robust financial health, tempered by some ongoing challenges. The company reported strong growth in earnings per share (EPS) and cash flow, alongside operational improvements and strategic reductions in capital expenditure. However, these positive developments were somewhat overshadowed by lower volumes attributed to macroeconomic factors and specific declines in the forest products sector, compounded by rising safety issues.
EPS and Operating Ratio Improvement
CN reported a 6% growth in EPS and an improvement in the operating ratio by 170 basis points to 61.4%. This reflects the company’s successful efforts in enhancing operational efficiency and profitability, despite the challenging economic conditions.
Free Cash Flow Growth
The company achieved a 14% increase in free cash flow year-to-date, with expectations for continued sequential acceleration into 2026. This growth underscores CN’s strong cash generation capabilities and financial resilience.
Capital Expenditure Reduction
CN announced a significant reduction in capital spending to $2.8 billion for 2026, down nearly $600 million from 2025. This decision follows the completion of capacity expansion projects and aligns with the current volume environment.
Operational Performance Metrics
Operationally, CN reported a car velocity of 211 miles per day for the quarter, with local service commitment performance at an impressive 95%. These metrics highlight the company’s focus on maintaining high service standards.
Share Buyback Acceleration
In the third quarter, CN accelerated its share buyback program, removing close to 8 million shares for just over $1 billion. This move reflects the company’s confidence in its financial position and commitment to returning value to shareholders.
Volume Environment and Macro Challenges
Despite these positive financial metrics, CN faced lower volumes due to a challenging macro environment, including unanticipated shocks from tariffs and labor issues. These factors have prevented full earnings growth.
Safety Ratios Increase
The company reported increases in reportable injury and accident ratios, up 4% and 14% year-to-date, respectively. This rise in safety incidents is a concern that CN will need to address moving forward.
Forest Products Decline
There was a notable year-over-year decline in forest products, particularly lumber, driven by weak demand and increased duties. This sector’s performance remains a challenge for CN.
Uncertain Macro Environment
CN anticipates that the uncertain macroeconomic environment will persist through at least the next several quarters, impacting its operations and growth prospects.
Forward-Looking Guidance
Looking ahead, CN has provided detailed guidance reflecting strategic adjustments. The company plans to reduce capital expenditure to $2.8 billion in 2026, aligning with the current volume environment. CN also aims to enhance productivity by reducing management labor costs by $75 million. Despite macroeconomic challenges, CN maintains its guidance for mid- to high single-digit EPS growth for 2025, with further details on 2026 guidance to be shared in the next quarterly results.
In summary, the earnings call for Canadian National Railway Company highlighted a strong financial performance with significant growth in EPS and cash flow, alongside strategic capital reductions. However, challenges such as lower volumes due to macroeconomic factors and increased safety incidents remain. The company is taking proactive steps to align its operations with the current environment, providing a cautiously optimistic outlook for the future.