Canadian National Railway Co. said its long-sought Mexico agreement provides two to three decades of revenue visibility and opens access to roughly CAD 45 billion in annual bilateral trade, boosting the railway’s outlook during a presentation at the CIBC Eastern Institutional Investor Conference in Montreal on Thursday.
Speaking alongside Chief Operating Officer Pat Whitehead and Senior Manager of Investor Relations Nicholas Schmidt, CFO Ghislain Houle outlined a series of operational gains and financial adjustments that have moderated the company’s near-term expectations despite strong traffic trends.
Revenue ton-miles rose 4.5% quarter-to-date and 4% year-to-date through the presentation date, though excluding grain those figures were each around 1%. Average haul length held near 1,800 miles. Network efficiency metrics strengthened: car velocity exceeded 200 car-miles per day, crew productivity rose 13% in the first half of the year, locomotive utilization gained 7%, and fuel efficiency improved 3% year-over-year to a record level. The scheduled operating model, Houle noted, can move 6% more volume with 7% fewer cars.
On capital allocation, CN remains on track to invest CAD 2.8 billion in capex this year, a significant reduction from 2025. Leverage climbed temporarily to between 2.5 and 2.7 times adjusted debt to adjusted EBITDA, with management targeting a return to 2.5 times next year. The company also has a 30-year streak of dividend increases, currently yielding 2.2%, and trades at a P/E of 21.7.
Fuel cost assumptions shifted as WTI crude fell from about $105 a barrel to roughly $92. Houle warned that the two-month lag in fuel surcharge recovery means lower prices will weigh on margins: EPS fuel tailwinds were trimmed to about CAD 0.10 for Q3 from a prior CAD 0.15 estimate, and Q4 is now expected at CAD 0.05 to CAD 0.10, down from CAD 0.10. If crude stays at current levels, the operating ratio is projected to take a negative hit of about 50 basis points in Q3 and 150 to 200 bps in Q4.
On the tariff front, a 50% U.S. levy on metals is redirecting some traffic to domestic lanes such as Ontario to Vancouver. Lumber remains subdued under a 45% tariff, with U.S. housing starts muted near 1.3 million and mortgage rates close to 7%.
CN also pointed to progress on its Fast Track cost-savings initiative, delivering nearly CAD 100 million in the first half. The program includes a review of roughly 5,000 vehicles alongside yard, terminal and auto-compound process evaluations. A separate productivity mega deduction — allowing 100% capital write-offs for tax purposes — should generate about CAD 150 million in free-cash-flow benefit in 2027 and more than CAD 200 million in 2028, though it has no impact on reported EPS.
The Mexico agreement, a strategic objective management said has been pursued since 1998, gives CN access to trade flowing predominantly east-west: roughly 80% of the CAD 45 billion in annual Canada-Mexico commerce moves to or from eastern Canada. The route to Mexico under the deal is about 400 miles shorter than a rival Canadian carrier’s path. In Chicago, CN emphasized it is the only railroad able to traverse the city on its own track, taking approximately one hour on its J corridor versus 10 to 12 hours on competitor lines.
Shares were trading around $119.52 to $120.88, up $2.01 or 1.71%, on a market capitalization of $72.4 billion.
