CN Rail 2025-26: Revenue C$17.3B (+1%), Operating Discipline
FY25 revenue C$17.29B (+1%); Op income C$6.58B (+5%); NI C$4.72B (+6%); EPS C$7.56 (+8%). Operating ratio held in mid-50s%. Capex C$3.66B (+3%). Total debt C$21.82B (+$0.45B). Capital return ~C$4.3B (C$2.21B div + C$2.12B buyback).
Key takeaways
- Steady operating compounder. Revenue +1% to C$17.3B, EPS +8% to C$7.56 — modest growth on volume mix + pricing + cost discipline. CN's standard playbook.
- Margin discipline holding. Op margin ~38% — among the best in the Class I rail peer group. Operating ratio in mid-50s% range.
- Capex remains heavy. C$3.66B (+3% YoY) reflecting ongoing infrastructure + locomotive + intermodal facility investment. The capital intensity is a feature of being a Class I — but limits FCF generation.
- Capital return ~C$4.3B (~C$2.21B div + C$2.12B buyback). Continues consistent return-of-capital pattern.
- No material commercial disclosures. CN's Q4 2025 reporting was relatively quiet vs CPKC's strategic narrative — implied "execution-as-usual" year.
Business
Canadian National Railway is a Class I freight railroad operating ~20,000 route miles across Canada + US Midwest + Southeast US. Three primary product groups:
- Petroleum & Chemicals + Bulk (~35% of revenue): Crude oil + petroleum products + chemicals + frac sand + grain + potash + coal + sulfur. Long-cycle contracts.
- Intermodal (~25% of revenue): International (Vancouver + Halifax + Prince Rupert ports) + domestic + cross-border with US partners.
- Forest Products + Metals + Minerals + Auto (~25% of revenue): Lumber + paper + ores + metals + Auto (CN serves Mexico via Kansas City Southern interchange).
- Other (~15%).
Geographic flow: Canada (Vancouver / Prince Rupert / Toronto / Halifax) → US Midwest (Chicago / Memphis / New Orleans). Network reaches Southeast US ports + Mexico through KCS (now CPKC) interchange.
Strategic position: Canada's largest railroad with longer/heavier trains + best-in-class operating ratios (typically 55-58% range). Exposure to grain + intermodal + Asia trade flow.
FY25 financial performance (CAD)
| Metric (FY) | 2023 | 2024 | 2025 |
|---|---|---|---|
| Revenue (C$B) | 16.83 | 17.05 | 17.29 |
| Gross profit (C$B) | 7.15 | 6.97 | 7.76 |
| Op income (C$B) | 6.60 | 6.25 | 6.58 |
| Op margin | 39.2% | 36.7% | 38.1% |
| EBITDA (C$B) | 9.03 | 8.64 | 9.11 |
| Net income (C$B) | 5.63 | 4.45 | 4.72 |
| Diluted EPS (C$) | 8.53 | 7.01 | 7.56 |
| FCF (C$B) | 3.78 | 3.15 | 3.39 |
| Capex (C$B) | -3.19 | -3.55 | -3.66 |
| Total debt (C$B) | 18.89 | 21.37 | 21.82 |
| Dividends (C$B) | -2.07 | -2.14 | -2.21 |
| Buyback (C$B) | -4.58 | -2.65 | -2.12 |
The operating leverage came back in FY25 — operating margin expanded 140bp YoY to 38.1%. EPS grew faster than revenue (+8% vs +1%) on cost discipline + buyback shrink.
Capital allocation
- Capex: -C$3.66B FY25 (21.2% of revenue) — capital-intensive cycle continuing.
- Dividends: -C$2.21B FY25 (+3% YoY). 30+ year payment history with steady raises.
- Buybacks: -C$2.12B FY25 (down from FY23 peak C$4.58B). Buyback pace moderated.
- Debt: C$21.82B (+C$0.45B YoY). Modest expansion.
FY26 outlook
CN did not provide a detailed Q4 FY25 earnings guide based on available data. Industry framework typically:
- Volume: low-to-mid single-digit growth on grain + intermodal mix
- Pricing: low-single-digit positive
- Cost discipline: continued operating ratio improvement
- Capex: similar capex profile to FY25
- Capital return: continued dividend + buyback at moderated pace
Implied FY26 revenue +mid-single-digit; EPS growth +5-8% on operating leverage.
Key risks
- Volume cyclicality: Grain (weather + harvest), intermodal (Asia trade), lumber/paper (housing), auto (vehicle production), crude oil (E&P spending) all cycle-exposed.
- Labor / contract negotiations: Train crews + maintenance workers periodically negotiate contracts; service disruption risk.
- Tariffs + USMCA: Cross-border traffic exposure to US-Canada trade policy.
- Interest rates: Higher rates compress utility-like rail valuation while debt cost is elevated.
- Mexico / CPKC partnership: Interchange + cross-border friction risks.
- Regulatory: STB rate proceedings + reciprocal switching potential changes affect customer pricing.
Bottom line
CN FY25 is the steady execution year — revenue +1%, op margin +140bp to 38.1%, EPS +8%. Capex C$3.66B + capital return C$4.3B + debt slight expansion. No major strategic disclosures vs CPKC's more active narrative. The thesis works as long as Canadian + Midwest commodity flow + intermodal + Asia trade continue at moderate levels. Risks are volume cyclicality + labor + tariff. Quality + scale + Canadian network advantage make CN a defensive industrial compounder with steady capital return profile.
Citations
- Canadian National Railway Co. FY25 Annual Report (filed January 2026, SEDAR + SEC 40-F).
- CN Q4 2025 earnings call (typically late January 2026) — financial detail per filings.
- Internal financial_statements view (consolidated annual + cash flow + capital structure).