- EPS Growth: Q4 EPS up 14% YoY; full-year adjusted diluted EPS rose 7% to $7.63.
- Operating Efficiency: Q4 operating ratio improved 250 bps to 60.1%, full-year 120 bps to 61.7%.
- Cash Flow Strength: Generated $3.3B in free cash flow, +8% YoY, with $2B in share repurchases in 2025.
- Volume & Productivity: Record Western Canadian Grain shipments and 5% Q4 workload increase despite headwinds.
- 2026 Outlook: Flat volumes vs. 2025, EPS growth to exceed volume driven by pricing and productivity, but $350M+ tariff revenue hit expected.
Segment Performance
The company's Grain segment set an all-time annual record for Western Canadian Grain shipments. Intermodal revenue was up, driven by strength in international and domestic segments. Petroleum & Chemicals also contributed to the revenue growth. Janet Drysdale, Chief Commercial Officer, noted that 2026 outlook is challenging, but the company is focused on driving growth in key segments.
Outlook and Guidance
For 2026, CN expects volumes to be flattish with 2025, assuming current tariff levels stay the same. EPS is expected to grow slightly ahead of volumes, driven by continued productivity improvements. Free cash flow is expected to grow, and CN remains committed to returning excess capital to shareholders. The company expects headwinds from mix, tax, other income, and FX, but is confident in its ability to generate double-digit EPS growth in a stabilized environment.
Valuation and Returns
CN's current valuation metrics indicate a P/E Ratio of 17.08, P/B Ratio of 3.74, and EV/EBITDA of 11.2. The company's Return on Equity (ROE) is 21.95%, and Return on Invested Capital (ROIC) is 8.9%. The Dividend Yield is 2.71%, and Free Cash Flow Yield is 4.21%. These metrics suggest that the company is generating strong returns and has a reasonable valuation.
Operational Efficiency
The company has made significant investments in its network, including the Edson Sub and Vancouver corridor, and has reduced structural costs. CN has also achieved a record level of fuel efficiency in Q4 and improved labor productivity. According to Tracy Robinson, "CN has built a more efficient and lean engine, providing operating leverage."