How will CN re-energize its commercial strategy, what unique opportunities are being pursued, and can volume grow in 2026 even with a flat economy?

Janet Drysdale stated the go-to-market strategy remains consistent but with increased intensity and urgency, driving decision-making down to capture every opportunity. She highlighted recent market share wins and innovation (e.g., first unit train of scrap iron). Tracy added that while overall volume growth might be limited in 2026, diversified segments like energy, ag, and industrial products offer strength. “Our go-to-market strategy doesn't change. We're going to continue to provide the service that helps our customers to win in their markets. We're going to price to the value of the service that we provide.”

What are the risks CN sees from potential M&A in the U.S., and does the lowest CapEx to revenue since 2002 limit future growth?

Tracy Robinson reiterated that the CapEx reduction does not limit growth, as network capacity is ahead of demand. Regarding M&A, she emphasized that CN believes it's not necessary for the industry and carries more risk than benefit, advocating for pro-competitive alliances instead. CN will protect its network and leverage its strategic position if M&A occurs. “I'm not concerned at all about limitations in our capability to grow. We are ahead of that from the network perspective.”

What's the background on the website for shippers to voice M&A concerns, and how will CN improve forecasting given past volatility?

Tracy Robinson explained that the industry needs more competitive options, not less, and pro-competitive alliances are a better path than mergers. Janet Drysdale acknowledged forecasting difficulties, stating CN will aim for guidance ranges, share upside/downside factors, and focus on agility and responsiveness to volume changes rather than just looking backward. “I think we're going to try and be more in a range. And we'll try and share more of that with you as well, Brian. What are the things that could bring us upside? What are the things that could bring us downside...”

CNI

Canadian National Railway Company (CNI) Q3 FY25 earnings call: guidance and Q&A

Earnings call· Sep 2025 (Q3 FY25)· Industrials· Oct 31, 2025

Source: earnings call transcript

Executive summary

Canadian National Railway Company Q3 FY25 — CapEx Reduction and Productivity Drive Amidst Weak Macro

Canadian National Railway delivered resilient Q3 FY25 results, marked by a significant CapEx reduction for 2026 and intensified productivity efforts to navigate a persistently weak macroeconomic environment. The company is focused on leveraging its diversified network and enhanced capacity to drive cash flow and shareholder returns, while acknowledging past guidance challenges and committing to improved transparency for future outlooks.

Highlights

Q3 FY25 EPS grew 6% to $1.83.
Operating ratio improved by 170 basis points to 61.4% in Q3 FY25.
Year-to-date free cash flow increased 14% to over $2.3 billion.
West Coast throughput capacity increased by 25% between Edmonton and Jasper, and 20% to Vancouver and Prince Rupert.
Reduced contractor spend by approximately $120 million year-to-date.

Concerns

Lower volumes prevented full earnings growth, with Q3 RTMs up only 1% and carloads up 5%.
Reportable injury and accident ratios are up 4% and 14% year-to-date, respectively.
Regulated grain pricing for the '25-'26 crop is 1.7%, down from nearly 6% last year.
Forest products volumes saw a year-over-year decline due to weak demand and duties that more than doubled on August 1.
Fuel price headwind of $0.03 of EPS in Q3.

Guidance & targets

Category	Target	Timeline	Confidence
Full-year 2025 EPS growth	mid- to high single-digit high materiality	FY25	High
Full-year 2025 volume growth (RTMs)	low single-digit range medium materiality	FY25	Medium
Full-year 2025 Capital Expenditures	$3.35 billion high materiality	FY25	High
Full-year 2025 WTI price assumption	USD 60 to USD 70 per barrel low materiality	FY25	Medium
Full-year 2025 Foreign Exchange rate assumption (CAD/USD)	$0.70 and $0.75 low materiality	FY25	Medium
Full-year 2025 Effective Tax Rate	24% to 25% low materiality	FY25	High
Full-year 2026 Capital Expenditures	$2.8 billion high materiality	FY26	High
Full-year 2026 Capital Intensity (percentage of revenue)	mid-teens high materiality	FY26	High
Full-year 2026 volume growth	limited volume growth high materiality	FY26	Medium

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Petroleum and Chemical Volumes rose across most major segments, with NGLs driven by increased export volumes via Prince Rupert and plastics/chemicals benefiting from market share gains. Plastics and chemical RTMs: up 8%NGLs: up 4%Crude: up 6%	—	—	—	—
Forest Products Lumber saw a year-over-year decline due to weak demand and the impact of duties, which more than doubled on August 1. Expected step down in Q3 run rate for lumber with additional 10% tariff on October 14.	—	decline	—	—
Intermodal Domestic units were up due to strong service and market share wins. International units benefited from easier comps given last year's labor disruption and strong Gemini volumes through Prince Rupert. Domestic units: up 18%International units: up 14%Prince Rupert volumes: up 30%	—	—	—	—

Capital programs

2026 Capital Envelope planned $2.8 billion

Period spend: $2.8 billion

Benefit:mid-teens percentage of revenue capital intensity

Set for 2026, down nearly $600 million from 2025, reflecting completion of capacity expansion projects and fleet upgrades, and a softer economy. Expected to remain at or about this level going forward.

Edson Sub Double-Tracking underway

Spent to date: more than 60% double tracked

Benefit:7 more trains a day of volume capability

Scheduled to come online in the fourth quarter, significantly improving speed, resilience, and reliability across this important bottleneck on the network.

West Coast Throughput Capacity Expansion (Edmonton-Jasper) completed

Start: 2022

Benefit:25% throughput increase

Investments have substantially lifted West Coast throughput between Edmonton and Jasper.

West Coast Throughput Capacity Expansion (Vancouver-Prince Rupert) completed

Start: 2022

Benefit:20% throughput increase

Investments have substantially lifted West Coast throughput to Vancouver and Prince Rupert.

EJ&E Investments (Chicago) completed

Benefit:increased fluidity around Chicago and reduced the crew start to Western Canada

Delivering direct cost and efficiency gains.

Zanardi Bridge (Prince Rupert) underway

Benefit:more capacity in the local area

One of two remaining projects to finish by the end of 2027 to further enhance capacity.

Siding outside Vancouver underway

One of two remaining projects to finish by the end of 2027 to further enhance capacity.

Risks & headwinds

Weak macroeconomic environment through at least the next several quarters

limited volume growth in 2026; weak outlook for North American industrial production and housing starts

Mitigation:Adjusting cost structure, driving productivity efforts, realigning capital spend, aggressive commercial sales program.

Tariffs and duties ongoing

duties on forest products more than doubled on August 1, additional 10% tariff on October 14; mix headwinds

Mitigation:Helping steel and aluminum customers find alternative markets; commercial team chasing every opportunity to offset weakness.

Fuel price headwind Q3 FY25

$0.03 of EPS

Mitigation:Improved fuel efficiency (2% in Q3); fleet modernization and predictive maintenance.

Labor costs and wage inflation Q3 FY25

Labor expense 2% higher year-over-year, mostly due to higher incentive compensation and wage inflation

Mitigation:5% lower headcount; workforce reduction initiative to be completed in Q4; $75 million management labor cost reduction.

Higher incident costs Q3 FY25

Other costs up 7% versus last year

Mitigation:Targeted safety campaigns focusing on frequent occurrences; leaders engaged in the field for winter preparation.

Industry M&A activity uncertain

Reduction of options and increased cost of service to customers

Mitigation:Intends to be an active and engaged participant in merger review to protect franchise and competition; will entertain all options to create value if a merger is approved.

What to watch in Q4 FY25

Full-year 2026 guidance

Q4 results call

Current limited volume growth expected

Target specific full-year 2026 guidance

Why it matters

Management has committed to providing more detailed full-year guidance, which will clarify the company's outlook and strategic direction.

And finally, on guidance, you can expect us to provide full year 2026 guidance when we report Q4 results.

Find out whether CNI delivers this. Inve re-checks your case every morning.

Q&A highlights

Will the reduced CapEx jeopardize CN's ability to capitalize on growth opportunities when the market recovers, especially given prior attractive growth projects?

Tracy Robinson explained that past investments (Edson sub, Vancouver corridor, locomotive fleet modernization) have already built significant capacity (e.g., 7 more trains/day capacity on Edson sub) and improved efficiency, positioning CN well for current and future volume growth without limitations.

“We are ahead of that from the network perspective. As I think about our network, we've got some real advantages.”

asked by Walter Spracklin · answered by Tracy Robinson

2 min read 6 chapters

Detailed narrative

Strategic Adjustments for Macro Headwinds

CN is proactively adjusting its strategy to address ongoing macro challenges, including a significant reduction in 2026 capital spend to $2.8 billion, down $600 million from 2025. This move aims to align spending with current volume realities and maintain mid-teen capital intensity as a percentage of revenue going forward.

The company also announced $75 million in management labor cost reductions and intensified productivity efforts across the organization.

Network Capacity and Efficiency

Investments over the past 3.5 years have addressed capacity bottlenecks in the West, with West Coast throughput up 25% between Edmonton and Jasper and 20% to Vancouver and Prince Rupert. The Edson sub is now over 60% double-tracked, adding 7 more trains per day capacity.

The locomotive fleet has been modernized, moving from the oldest to middle-of-the-pack in the industry, and locomotive availability is at 93%.

Q3 Operational Performance

The company delivered strong Q3 results with a 6% increase in EPS and a 170 basis point improvement in operating ratio to 61.4%. Operational metrics showed best levels in a decade, including car velocity of 211 miles per day and local service commitment performance at 95%. Fuel efficiency improved by 2% in the quarter.

Commercial Strategy and Market Share

Despite softer-than-expected volumes in merchandise segments due to macro and tariff overhang, the commercial team, under new Chief Commercial Officer Janet Drysdale, is aggressively pursuing market share. This 'boots on the ground' sales program brought in $35 million in Q3 and is closing in on $100 million in Q4, securing wins in chemicals, plastics, and domestic intermodal.

Capital Allocation and Shareholder Returns

The reset capital spend and cost controls are expected to accelerate free cash flow in 2026, with incremental cash returned to shareholders. CN accelerated its share buyback in Q3, repurchasing nearly 8 million shares for over $1 billion, while maintaining a strong balance sheet with leverage at 2.54x, consistent with its 2.5x target.

M&A Stance and Industry Outlook

Tracy Robinson reiterated CN's view that the industry does not need a merger for better service, advocating for more cooperation and less regulation. CN intends to be an active participant in any merger review to protect its franchise and competition, while remaining open to options to create shareholder value if a merger is approved.

The company anticipates limited volume growth in 2026 due to a weak outlook for North American industrial production and housing starts.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.