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1. Company Snapshot

1.a. Company Description

Canadian National Railway Company, together with its subsidiaries, engages in the rail and related transportation business.The company's portfolio of goods includes petroleum and chemicals, grain and fertilizers, coal, metals and minerals, forest products, intermodal, and automotive products serving exporters, importers, retailers, farmers, and manufacturers.It operates a network of 19,500 route miles of track spanning Canada and the United States.


The company also provides vessels and docks, transloading and distribution, automotive logistics, and freight forwarding and transportation management services.Canadian National Railway Company was incorporated in 1919 and is headquartered in Montreal, Canada.

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1.b. Last Insights on CNR

Canadian National Railway Company's recent performance was negatively driven by an earnings miss in Q4 2024, with revenue-ton-miles trending down 3.2% year-over-year, below BofA's estimate. Elevated operating expenses and weak liquidity also challenge the company's prospects, as noted by a recent analyst report. Despite its expectation to deliver 10%-15% EPS growth in 2025 and a lifted dividend, the company's current financial situation suggests caution.

1.c. Company Highlights

2. CN Delivers Strong Q3 Earnings Despite Macro Challenges

CN reported a 6% increase in EPS to $1.83, beating analyst estimates of $1.78, driven by cost takeout and strong operating performance. Revenues were up 1% year-over-year, despite softer volumes due to macro and tariff headwinds. The operating ratio improved by 170 basis points to 61.4%, indicating effective cost management. As Ghislain Houle noted, "We've identified meaningful cost savings and are implementing a rigorous approach to managing expenses."

Publication Date: Nov -04

📋 Highlights
  • EPS Growth & Operating Efficiency: Achieved 6% EPS growth to $1.83 and improved operating ratio by 170 bps to 61.4%.
  • Capital Spend Reduction: Cut 2026 capex to $2.8B, a $600M reduction from 2024, and aims to save $75M in management labor costs.
  • Intermodal Revenue Growth: Intermodal drove revenue growth with domestic units +18% and international units +14% YoY.
  • Free Cash Flow Expansion: Generated $2.3B in free cash flow through September 2024, up 14% from the prior year.
  • Cost Discipline: Reduced labor costs by 5% via headcount optimization and cut fuel expenses by 20% due to tax removal and lower prices.

Revenue Growth Drivers

Revenue growth was driven by Intermodal, with domestic units up 18% and international units up 14%. The company's strong service and market share gains in chemicals and plastics also contributed to revenue growth. Janet Drysdale highlighted the company's go-to-market strategy, emphasizing the importance of providing service that helps customers win in their markets and pricing to the value of the service.

Cost Management and Productivity Efforts

CN's focus on productivity and efficiency has allowed it to maintain a strong operating ratio. The company has implemented various cost-saving initiatives, including reducing contractor spend and overtime. Tracy Robinson mentioned that the $75 million program will have a smaller impact in Q4, with the majority of benefits expected in 2026.

Valuation and Outlook

CN's current valuation metrics indicate a P/E Ratio of 18.48 and an EV/EBITDA of 11.83. Analysts estimate next year's revenue growth at 3.7%. With a strong network and strategic partnerships, CN is well-prepared to adapt to changing market conditions. The company's diversified business and strong position in commodities make it resilient to macroeconomic fluctuations.

Growth Opportunities and Challenges

CN is well-positioned to drive growth into the US and South American markets and is not concerned about limitations in its capacity to grow. The company expects a record crop in Canadian grain but sees a step-down in lumber volumes due to the additional 10% tariff. Key areas of growth include LNG Canada, frac sand, and NGL expansion, with the Port of Prince Rupert playing a significant role.

3. NewsRoom

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Bâtir un avenir durable : le CN publie son rapport sur le développement durable

Dec -02

Source: globenewswire.com

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Le CN célèbre avec fierté le 30e anniversaire de sa privatisation

Nov -18

Source: globenewswire.com

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Ghislain Houle, Executive Vice-President and Chief Financial Officer to Address the Desjardins Toronto Conference on November 24

Nov -17

Source:

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Bernstein Raises CNI Price Target to $109.44, Maintains Market Perform Rating

Nov -16

Source:

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Duan Yongping's Strategic Moves: A Closer Look at Berkshire Hathaway Inc's 6.2% Portfolio Impact

Nov -14

Source:

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Assessing Canadian National Railway (TSX:CNR) Valuation After Recent Share Price Dip

Nov -08

Source:

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Evercore ISI Lifts Its Price Target on Canadian National Railway Company (CNI) to $103

Nov -07

Source:

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CN Announces US$700 Million Debt Offering

Nov -07

Source:

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (4.40%)

6. Segments

Rail Operations

Expected Growth: 4.4%

Canadian National Railway Company's growth is driven by increasing demand for rail transportation services, investments in digitalization, and a strong pricing environment, leading to a forecast CAGR of 4.4%.

7. Detailed Products

Intermodal

A service that combines rail and truck transportation to move goods in containers, providing a cost-effective and efficient way to transport goods over long distances.

Coal

Transportation of coal from mines to power plants and industrial facilities, supporting the generation of electricity and industrial processes.

Grain

Transportation of grains such as wheat, barley, and oats from farms to processing facilities, supporting the agricultural industry.

Forest Products

Transportation of forest products such as lumber, pulp, and paper from mills to manufacturing facilities, supporting the forestry industry.

Automotive

Transportation of finished vehicles and automotive parts from manufacturing facilities to dealerships and distribution centers, supporting the automotive industry.

Chemicals

Transportation of chemicals and hazardous materials from manufacturing facilities to industrial customers, supporting the chemical industry.

Petroleum and Chemicals

Transportation of petroleum products such as crude oil, refined fuels, and chemicals from production facilities to refineries and distribution centers, supporting the energy industry.

Metals and Minerals

Transportation of metals and minerals such as iron ore, copper, and nickel from mines to smelters and manufacturing facilities, supporting the mining industry.

8. Canadian National Railway Company's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for Canadian National Railway Company is low due to the high barriers to entry and the lack of viable substitutes for rail transportation.

Bargaining Power Of Customers

The bargaining power of customers for Canadian National Railway Company is medium due to the presence of large industrial customers who can negotiate better rates, but the company's diversified customer base and lack of dependence on a single customer mitigate this power.

Bargaining Power Of Suppliers

The bargaining power of suppliers for Canadian National Railway Company is low due to the company's large scale of operations and its ability to negotiate better prices with suppliers.

Threat Of New Entrants

The threat of new entrants for Canadian National Railway Company is low due to the high barriers to entry, including the need for significant capital investment and regulatory approvals.

Intensity Of Rivalry

The intensity of rivalry for Canadian National Railway Company is high due to the presence of strong competitors in the rail industry, including Canadian Pacific Railway, and the ongoing competition for market share and customers.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 48.42%
Debt Cost 4.41%
Equity Weight 51.58%
Equity Cost 7.26%
WACC 5.88%
Leverage 93.89%

11. Quality Control: Canadian National Railway Company passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
PACCAR

A-Score: 6.0/10

Value: 3.7

Growth: 6.7

Quality: 6.1

Yield: 8.0

Momentum: 3.0

Volatility: 8.3

1-Year Total Return ->

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Stock-Card
Norfolk Southern

A-Score: 5.6/10

Value: 2.7

Growth: 4.7

Quality: 5.7

Yield: 4.0

Momentum: 7.0

Volatility: 9.3

1-Year Total Return ->

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Stock-Card
CN Rail

A-Score: 5.3/10

Value: 3.2

Growth: 5.1

Quality: 6.4

Yield: 5.0

Momentum: 2.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
Union Pacific

A-Score: 5.2/10

Value: 2.5

Growth: 4.8

Quality: 6.4

Yield: 4.0

Momentum: 4.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Wabtec

A-Score: 5.1/10

Value: 2.8

Growth: 6.7

Quality: 6.3

Yield: 0.0

Momentum: 6.0

Volatility: 8.7

1-Year Total Return ->

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Stock-Card
Canadian Pacific Railway

A-Score: 5.1/10

Value: 2.9

Growth: 5.4

Quality: 6.4

Yield: 2.0

Momentum: 4.0

Volatility: 9.7

1-Year Total Return ->

View Full Report

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

135.78$

Current Price

135.78$

Potential

-0.00%

Expected Cash-Flows