Loading...
01/10 05:07
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call summary and Q&A reveal mixed signals. While CN maintains its EPS growth guidance and highlights strategic investments, there are concerns about recession risks, tariff uncertainties, and volume challenges. The Q&A section did not provide additional positive insights, and management's responses were sometimes vague. The planned share buyback is a positive, but the economic outlook and volume issues temper the overall sentiment, resulting in a neutral rating.
Adjusted EPS Growth 2% growth year-over-year. This was achieved despite flat year-over-year carloads and a 1% reduction in RTMs. The growth was attributed to strong bulk volumes and proactive cost management.
Revenue Down 1% year-over-year. This decline was due to weaker market fundamentals, ongoing U.S. trade and tariff actions, and an unfavorable mix impact. Additionally, the repeal of the Canadian carbon tax surcharge reduced revenues by $70 million.
Operating Ratio Improved by 50 basis points year-over-year to 61.7%. This improvement was driven by swift cost adjustments and operational efficiency.
Grain and Fertilizers Revenue Increased by 12% year-over-year. This was due to stronger grain shipments in both Canada and the U.S., higher U.S. corn exports, new ethanol projects, and increased potash exports.
Fuel Expense Decreased by 25% year-over-year. This was due to the elimination of the Canadian carbon tax and a 23% decrease in price per gallon.
Free Cash Flow Increased by 5% year-over-year to over $1.5 billion. This increase was primarily driven by lower capital expenditures.
Car Velocity Improved to 213 miles per day, a 3% increase year-over-year. This was attributed to a faster network train speed and improved operational efficiency.
T&E Labor Productivity Improved by 11% year-over-year. This was achieved through targeted furloughs and efficient resource management.
Locomotive Availability Increased to 92.5%, with failures down 3% year-over-year. This improvement was driven by enhanced predictive maintenance capabilities and systemic failure reduction.
Grain Volumes Up 6% in Canada and almost 30% in the U.S. This increase was due to higher U.S. corn exports, new ethanol projects, and acquisition-related volumes.
New Ethanol Projects: Higher U.S. corn exports and new ethanol projects contributed to a 30% increase in U.S. grain volumes.
AltaGas Facility Expansion: Continued growth in export propane through the AltaGas facility in Prince Rupert is expected.
Energy Market Expansion: Efforts are underway in Canada to develop better access to global markets, particularly in the energy space.
Tariff Mitigation Strategies: In response to U.S. tariffs on Canadian steel and aluminum, CN worked with customers on intra-Canada and intra-U.S. moves to mitigate losses.
Operational Metrics Improvement: Car velocity improved to 213 miles per day, train speed increased by 3%, and yard dwell improved by 1%.
Cost Management: 8% reduction in mainline manifest train starts and 560 train and engine employees furloughed to align with demand.
Locomotive Efficiency: Locomotive availability reached 92.5%, with an 8% reduction in unit costs due to enhanced predictive maintenance.
Volume Outlook Adjustment: Revised full-year volume assumption to low single-digit RTM growth due to macroeconomic and tariff uncertainties.
CapEx Reduction: Capital expenditures for the year reduced by $50 million, with further tightening planned.
Tariffs and Trade Uncertainty: The ongoing uncertainty around tariffs and trade, particularly in Canada, is impacting merchandise and intermodal volumes. The escalation of U.S. tariffs on Canadian-made steel and aluminum to 50% in June has disrupted southbound flows, creating challenges for the metals and minerals business.
Macroeconomic Environment: Concerns over a weakening macroeconomic environment are affecting demand in key sectors such as forest products, metals, and autos. This has led to reduced volume expectations for the second half of the year.
Forest Products and Lumber: The forest products segment faces challenges from higher softwood duties for Canadian imports, the U.S. Section 232 lumber investigation, and a slower-than-expected housing recovery. Lumber mill curtailments are also impacting related products like wood pulp.
Petroleum and Chemicals: Extended turnarounds at Western Canadian refineries and policy changes in the U.S. and Canada have reduced volumes in refined petroleum products and renewables. This has created a mix issue and revenue headwinds.
Intermodal and International Volumes: Increased blank sailings and tariff-related uncertainties are impacting international intermodal volumes, particularly through Vancouver. This has tempered growth expectations for the second half of the year.
Automotive Sector: The automotive sector is experiencing shifts in production flows and reduced volumes between Canada and the U.S., driven by tariff impacts and market adjustments.
Wildfire Season: Early wildfire season has caused several branch line outages, although mainline impacts have been minimal so far. This poses a risk to network fluidity and operations.
Currency Exchange Rates: The appreciation of the Canadian dollar against the U.S. dollar is creating a headwind for earnings, with every penny of appreciation representing a $0.05 EPS impact on an annualized basis.
Carbon Tax Repeal: The repeal of the Canadian carbon tax surcharge has reduced revenues by $70 million in the quarter and will continue to be a headwind for the next three quarters.
Volume Growth: The company has revised its volume growth assumption for the remainder of 2025 to low single-digit RTM growth due to macroeconomic volatility, tariff impacts, and weaker market fundamentals.
Revenue Expectations: Revenue per RTM is expected to remain flat due to unfavorable mix impacts, including reduced merchandise business and lower shipments in certain sectors.
Capital Expenditures: The company plans to reduce its CapEx envelope for 2025 by about $50 million and is exploring further opportunities to tighten CapEx for this year and next year.
Market Trends: The company anticipates continued pressure in sectors like Forest Products, metals, and automotive due to tariffs, weaker demand, and market shifts. However, growth is expected in bulk and energy franchises, including Canadian grain, potash exports, and coal production in Northeast B.C.
Operational Adjustments: The company is managing costs tightly, including furloughing employees, storing system cars, and reducing locomotive fleet size to align with volume shifts. It is also leveraging service performance to increase volumes and mitigate tariff impacts.
Intermodal and Merchandise Outlook: International intermodal volumes are expected to grow year-over-year in the second half of 2025, but the outlook is tempered by tariff uncertainties and inventory pull-forward. Merchandise volumes face risks from tariffs, softwood duties, and slower housing recovery.
Petroleum and Chemicals: Volumes are expected to recover in Q4 2025 as refinery turnarounds are resolved. Growth is anticipated in export propane and fuel distribution facilities.
Grain and Fertilizers: The company expects a seasonal uptick in Canadian grain shipments in September and higher export potash shipments in Q4 2025.
Earnings Guidance: The company has revised its EPS growth guidance for 2025 to mid- to high single-digit growth, reflecting revised volume assumptions and a higher Canadian dollar assumption.
Dividend Program: The company did not explicitly discuss any changes or updates to its dividend program during the call.
Share Buyback Program: The company confirmed the continuation of its current share buyback program, which runs through February 3 of next year. The leverage at the end of Q2 was 2.5x, and the company maintains a 2.5x adjusted debt to adjusted EBITDA target.
The earnings call summary and Q&A reveal mixed signals. While CN maintains its EPS growth guidance and highlights strategic investments, there are concerns about recession risks, tariff uncertainties, and volume challenges. The Q&A section did not provide additional positive insights, and management's responses were sometimes vague. The planned share buyback is a positive, but the economic outlook and volume issues temper the overall sentiment, resulting in a neutral rating.
The earnings call showed positive financial performance with increased EPS, revenue, and free cash flow. The share buyback program is also a positive signal. However, external risks such as potential recessions, trade uncertainties, and supply chain issues pose significant threats. The Q&A revealed some uncertainty in management's responses, particularly regarding tariffs and blank sailings. Despite the strong financials, these risks and uncertainties balance out the positive aspects, leading to a neutral sentiment.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
