CNI — Canadian National Railway Company

Summary of CNI Q2 2026 Earnings Call

1. Key Financial Results and Metrics:

• Earnings Per Share (EPS): Reported diluted EPS of $2.06 (up 10% YoY), adjusted diluted EPS of $2.08 (up 11% YoY), and $2.09 (up 12% FX adjusted).
• Revenue Growth: Revenues increased by 11% YoY, driven by a 5% increase in Revenue Ton Miles (RTM).
• Operating Ratio: Adjusted operating ratio improved to 62.2%, a 50 basis point increase from 61.7% YoY, impacted by higher fuel prices.
• Free Cash Flow: Up approximately 20% year-to-date, totaling around $300 million, aided by stronger earnings and disciplined capital spending.
• Leverage: End-of-Q2 leverage at 2.6x, with a target of 2.7x adjusted debt to adjusted EBITDA for 2026.

2. Strategic Updates and Business Highlights:

• Operational Efficiency: Improved productivity metrics, including a 3% increase in gross ton miles and significant gains in labor and locomotive productivity.
• Agreements with Union Pacific: Two strategic agreements were announced, enhancing CN's network access to key markets in Mexico and Kansas City, which are expected to create long-term growth opportunities.
• Fast Track Initiative: Achieved nearly $100 million in realized benefits from operational efficiencies, with ongoing efforts to improve terminal productivity and reduce waste.
• Commodity Performance: Strong performance in grain, petroleum, and chemicals, with notable growth in domestic intermodal and metals despite tariff challenges.

3. Forward Guidance and Outlook:

• Earnings Guidance: CN raised its full-year EPS growth outlook to mid- to high single digits, expecting low single-digit volume growth for 2026.
• Market Expectations: Anticipated strength in grain volumes for Q3, with potential challenges in Q4 due to tough year-over-year comparisons.
• Fuel and FX Assumptions: Updated fuel price expectations remain between USD 80 to USD 110 per barrel, with FX assumptions adjusted from $0.73 to $0.71.

4. Bad News, Challenges, or Points of Concern:

• Operating Ratio Pressure: The operating ratio was negatively impacted by higher fuel prices, which could pose challenges if fuel costs remain volatile.
• Wildfire Risks: Active wildfire seasons in Northern Ontario and British Columbia were monitored, although minimal operational impact was reported.
• Competitive Pressures: Concerns regarding the broader implications of the Union Pacific merger on industry competition, though CN has secured agreements to mitigate risks.

5. Notable Q&A Insights:

• Market Opportunities: Discussions highlighted potential for truck-to-rail conversion, particularly in the U.S. due to tightening truck capacity.
• Union Pacific Agreements: Clarification on the agreements indicated a focus on both northbound and southbound traffic, with expectations for immediate benefits from the extended length of haul.
• Capacity Management: Management expressed confidence in network capacity to handle increased volumes without significant additional capital investment, while also addressing potential congestion risks.
• Customer Engagement: Strong emphasis on maintaining customer relationships and adapting to market changes, particularly in response to tariffs and trade dynamics.

Overall, CN reported a strong quarter with solid financial performance, strategic growth initiatives, and a positive outlook despite some challenges related to fuel costs and competitive pressures.