Canadian National Railway Company
CNI · NYSE
Next quarter
Expected to report Jan 29, 2027 — estimated from last year’s reporting date.
Consensus is $1.55 EPS for Dec 2026 across 9 estimates, ranging $1.50 to $1.58.
CNI Sep 2026
- 3.36%
- $1.49
- $1.54
- —
- —
Highlights
- EPS beat and growth: The supplied expectations data show EPS of $1.54 versus consensus of $1.49, a 3.36% beat. In CN’s reported Canadian-dollar results, diluted EPS was C$2.00, up 9% year over year; adjusted diluted EPS was C$2.16, up 18%.
- Revenue and volumes: Revenue rose 15% to C$4.771 billion, with RTMs up 4% and freight revenue per RTM up 10%. Grain and fertilizers revenue grew 19%, and automotive grew 31%.
- Underlying margins: Adjusted operating income increased 16% to C$1.862 billion and adjusted operating ratio improved 0.4 points to 61.0%. Reported operating ratio worsened 2.3 points to 63.7%, including a C$118 million impairment and C$14 million of advisory costs.
- Cash generation: Quarterly free cash flow rose 36% to C$1.076 billion; nine-month free cash flow increased 25% to C$2.918 billion. Operating cash flow was nearly flat year over year at C$1.904 billion.
- Productivity and safety: Fast Track had delivered about C$120 million year to date. Locomotive productivity improved 5%, employee productivity 7%, and CN reported its best third-quarter accident and injury ratios in a decade.
- Guidance and leverage: CN reaffirmed low-single-digit RTM growth and mid-to-high-single-digit adjusted EPS growth for 2026, saying it was tracking toward the upper end. It expects year-end adjusted debt/EBITDA of about 2.5x, earlier than previously anticipated.
- Capital returns and investment: CN repurchased 3.9 million shares for about C$676 million in the quarter and maintained 2026 capital investment guidance of approximately C$2.8 billion, net of customer reimbursements.
- Growth opportunities and risks: CN cited planned UP network rights to extend its reach into Mexico and a C$0.03 EPS impact in 2027 from changing Elk Valley Resources traffic arrangements. Canadian labor agreements covering about 8,800 employees expire at year-end.
Analysis
CN’s third quarter delivered strong top-line growth and an adjusted earnings beat, alongside a reported margin decline driven by costs and a one-off impairment. Revenue rose 15% year over year to C$4.771 billion as RTMs increased 4% and freight revenue per RTM rose 10%. Adjusted diluted EPS reached C$2.16, up 18%; the supplied expectations data show EPS of $1.54 against consensus of $1.49, a 3.36% beat. Compared with Q2 2026, revenue was little changed at C$4.771 billion versus C$4.753 billion, while operating income, net income and diluted EPS eased from C$1.781 billion, C$1.249 billion and C$2.06, respectively. Year over year, reported net income rose 6% to C$1.209 billion and diluted EPS rose 9% to C$2.00.
The quarter’s key tension was growth translating into better adjusted earnings but not a better reported operating ratio: the adjusted ratio improved 0.4 points to 61.0%, while the reported ratio rose 2.3 points to 63.7%. A C$118 million non-cash impairment for discontinued technology-project components and C$14 million in rail-consolidation advisory costs were excluded from adjusted results; higher fuel prices also pressured costs. Productivity gains and disciplined investment supported free cash flow growth, and management reaffirmed 2026 guidance while indicating it was tracking toward the upper end. Grain, energy and automotive volumes were notable growth drivers, although grain comparisons strengthen in the fourth quarter and trade, fuel and labor conditions remain uncertainties.
Revenue and earnings
Revenue growth reflected higher volumes and yield, with the weaker Canadian dollar also supporting freight revenue per RTM. RTMs increased 4%, while freight revenue per RTM rose 10% (9% at constant currency). Fuel surcharge revenue was C$343 million higher year over year, mainly reflecting higher applicable surcharge rates. Reported operating expenses grew faster than revenue, but adjusted operating income advanced 16% to C$1.862 billion after excluding the impairment and advisory costs.
- Commodity mix: Grain and fertilizers revenue increased 19% to C$923 million, with RTMs up 12% on stronger Canadian and U.S. grain exports. Automotive revenue rose 31% to C$284 million as imports and transborder shipments grew.
- Other growth and offsets: Petroleum and chemicals revenue increased 17% to C$1.000 billion, and metals and minerals rose 18% to C$561 million. Intermodal revenue increased 9% despite RTMs declining 3%; forest products RTMs fell 4%, and coal RTMs fell 5%.
- Sequential comparison: Revenue was C$4.771 billion versus C$4.753 billion in Q2 2026, while operating income was C$1.730 billion versus C$1.781 billion and diluted EPS was C$2.00 versus C$2.06.
Costs and productivity
Operating expenses rose 19% to C$3.041 billion, chiefly from higher fuel prices, wage increases, purchased services and material, and the C$118 million impairment. CN discontinued development of portions of its dispatching and back-office IT projects; management described vendor and project execution failures and said it was revisiting governance and vendor selection. Adjusted operating ratio was 61.0%, 0.4 points better year over year, while fuel prices diluted the quarter’s ratio by about 50 basis points. The reported 63.7% ratio also reflects the excluded impairment and advisory costs.
- Operating leverage: RTMs rose 4% while employee productivity improved 7% and locomotive productivity improved 5%; management said cost per GTM was down 3% year to date.
- Fuel efficiency: Consumption improved 2% to 0.814 U.S. gallons per 1,000 GTMs, a third-quarter record. Management cited approximately C$15 million of fuel savings during the quarter.
- Safety and service: Injury frequency improved to 0.80 from 1.18 and accident rate to 1.51 from 1.92 per million train miles. Through network speed fell 2% to 19.1 mph and car velocity declined 2% to 207 miles per day.
Cash and capital allocation
Free cash flow increased to C$1.076 billion from C$793 million a year earlier, while operating cash flow was broadly flat at C$1.904 billion. The improvement reflected lower investing cash outflow, which fell to C$828 million from C$1.120 billion. For the first nine months, free cash flow was C$2.918 billion, up 25%, with management citing disciplined capital spending and strong operating performance, partly offset by higher cash taxes. Free cash flow conversion was 80% year to date.
- Capital program: CN reiterated approximately C$2.8 billion of 2026 capital investment, net of customer reimbursements; property additions were C$1.939 billion in the first nine months.
- Shareholder returns: CN repurchased 3.9 million shares for C$676 million in the quarter and 11.1 million shares for C$1.751 billion under its current issuer bid through September 30. The quarterly dividend was C$0.915 per share.
- Leverage: Adjusted debt-to-adjusted EBITDA was 2.61x at quarter-end, and management expected it to return to about 2.5x by year-end rather than in 2027.
Guidance and growth
CN reaffirmed its 2026 outlook for low-single-digit RTM growth and mid-to-high-single-digit adjusted diluted EPS growth, and said it was tracking toward the upper end. Management cautioned that fourth-quarter comparisons will be stronger and grain growth should moderate as CN laps last year’s record performance. It also flagged uncertainty from volatile macroeconomic conditions, geopolitical conflicts and trade tensions. For the fourth quarter, management expected an approximately C$0.10 EPS tailwind if fuel prices remained at spot levels, alongside a 100–150 basis-point operating-ratio headwind.
- Commercial wins: Management said boots-on-the-ground sales efforts had generated approximately C$300 million in new revenue year to date. Fast Track had delivered about C$120 million of realized benefits, which management said would carry into next year.
- Mexico access: CN and Union Pacific announced a memorandum of understanding for network rights connecting Canada and Mexico, including expanded UP access over CN’s former EJ&E corridor. CN described a roughly US$45 billion annual Canada–Mexico trade opportunity; some rights require regulatory approval.
- Capacity for growth: CN said prior investments increased Western Corridor capacity by about 25%, with more than 200 locomotives stored and additional capacity available. Management expects growth to be accommodated within a more normalized capital intensity, while continuing targeted network investment.
Operating and labor risks
- Labor negotiations: TCRC and United Steelworkers agreements covering approximately 6,000 operating employees and 2,800 track workers expire December 31, 2026. Negotiations began in September, with further sessions scheduled through December.
- Elk Valley traffic: Under a revised arrangement beginning January 1, 2027, about half of the relevant traffic will continue under the existing handoff pattern and half will interchange with CN farther along the route. Management estimated an approximately C$0.03 EPS impact in 2027 and said it would seek replacement business.
- Trade and terminal disruption: Management cited tariffs and uncertainty around USMCA discussions as demand risks. A labor disruption at the Prince Rupert coal terminal was affecting coal and petroleum coke throughput, with a smaller impact on NGLs; CN said these effects were included in its low-single-digit full-year RTM outlook.
