Key Morningstar Metrics for Canadian National Railway
- : C$159.00Fair Value Estimate
- : ★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : MediumMorningstar Uncertainty Rating
What We Thought of Canadian National Railway’s Earnings
Canadian National Railway’s CNR second-quarter revenue jumped 11% year over year—excluding foreign exchange—on higher carloads and strong all-in yield gains (surging fuel surcharges, positive core pricing). Adjusted margin fell this quarter, mostly due to fuel noise.
Why it matters: Carload growth—excluding intermodal—accelerated (up 3%) on robust grain (favorable harvest) and stronger chemicals and automotive shipments, which benefited in part from new business wins. These factors were partly offset by lower coal (production headwinds), soft forest products, and tariff headwinds for certain Canada-US shipments such as steel.
- Intermodal activity flipped negative (down 5%) on tough import pull-forward comps for international containers. That said, it sounds like domestic activity increased with help from good service levels and new business wins—similar to what the US rails have reported.
- We believe CN is executing well in terms of network efficiency gains, but its adjusted operating ratio (expenses/revenue; lower is better) deteriorated to 62.2%—worse than our forecast—primarily because of the mathematical impact of rapidly rising fuel costs and surcharges, coupled with wage inflation.
The bottom line: We maintain our fair value estimate for wide-moat Canadian National, as our longer-term model forecast will likely remain intact.
- After a solid rally in the first half of 2026 due to rebounding domestic intermodal demand and hints of industrial sector recovery (including improvement in the ISM Manufacturing PMI), Canadian National is modestly overvalued relative to our long-term model forecasts.
- Valuation aside, tariffs will pressure certain cross-border shipments near term, but CN’s new business pipeline is healthy, grain is strong, and we expect modest demand improvement among several industrial end markets this year barring a tariff- or oil shock-driven economic pullback.
