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Earnings Growth: 8% increase in earnings for the first quarter.
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Operating Ratio: Improved by 20 basis points to 63.4%.
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Revenue: Increased by 4% year-over-year.
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Revenue Ton Miles (RTM): Growth of 1% in the quarter.
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Free Cash Flow: Over $600 million generated, about $100 million more than last year.
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EPS: Reported at $1.85, up 8% versus last year.
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Labor Productivity: Improved by 2%, with an 8% gain in training engine employee productivity.
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Fuel Expense: Decreased by 5% due to an 8% decrease in price per gallon.
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Net Income: Impacted by a net remeasurement gain related to the Iowa Northern acquisition.
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Full Year EPS Growth Guidance: Maintained at 10% to 15% for 2025.
Release Date: May 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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Canadian National Railway Co (NYSE:CNI) reported an 8% earnings growth and a 20 basis point improvement in the operating ratio for the first quarter.
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The company successfully concluded an arbitration process with Canadian conductors and locomotive engineers, resulting in a 3-year deal with annual wage increases of 3%.
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CNI has reached ratified agreements with nine unions in the US, representing roughly half of its US workforce.
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The company is well-positioned to enable global trade with available capacity at all three coasts of North America, providing customers with gateway options.
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CNI reported strong operational performance in March, with car velocity improving to nearly 200 miles per day and a record amount of Canadian grain moved.
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There is increased uncertainty around tariffs and trade, with a heightened risk of recession in both Canada and the US.
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The company experienced a more normalized Q1 weather pattern, which resulted in tougher comparisons versus last year, especially in February.
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CNI faced significant impacts across its network due to extreme cold and record snowfall, particularly in February, which limited network fluidity.
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The company observed a decrease in iron ore shipments due to softer export demand and production issues at mines.
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CNI's intermodal revenue slipped by 3%, largely reflecting more Canadian cargo as the company works to rebuild US-destined business following 2024 labor disruptions.
Q: Can you provide clarity on the US intermodal business through Western ports and the impact of tariffs and blank sailings? A: Remi Lalonde, Chief Commercial Officer, explained that US volumes have been slower to recover but picked up nicely in April. The Gemini Alliance at Prince Rupert has exceeded expectations, with Canadian volumes up 16%. Despite an increase in blank sailings, the impact on ports served by CN is less severe than others, and growth is expected in the second half. CN is exploring new supply chain solutions, including a new intermodal service from Mexico to Gulfport and partnerships with Ferromex.
Q: How are you managing headcount and network flexibility given recent weather challenges and work rules? A: Patrick Whitehead, Senior Vice President, Network Operations, stated that the network recovered quickly from weather disruptions, and they feel confident about their current manpower. They have 470 training engine service furloughs and 50 in mechanical, allowing flexibility to adjust to volume changes. Tracy Robinson, CEO, praised the team for doing more with fewer resources and maintaining the ability to flex up or down as needed.
Q: What is the outlook for operating ratio improvement as operations improve in March and April? A: Tracy Robinson, CEO, mentioned that while they don't guide on operating ratio quarter-by-quarter, they expect improvement as the year progresses. The team is focused on efficiency, and strong pricing and network velocity are expected to drive margin improvement by year-end.
Q: How is the Gemini Alliance impacting CN's operations, and are there shifts in business from Vancouver to Prince Rupert? A: Remi Lalonde, Chief Commercial Officer, highlighted that the Gemini Alliance brings a higher service promise, aligning well with CN's service reliability at Prince Rupert. The alliance has exceeded expectations, pulling volume into Rupert and benefiting both US and Canadian volumes.
Q: How are trade flows and potential new alliances being discussed with rail partners, and is there potential for industry consolidation? A: Tracy Robinson, CEO, emphasized the benefits of partnerships to provide single-line service benefits without significant capital or regulatory risks. While consolidation is always a topic, the focus remains on leveraging network benefits and exploring partnerships with Class 1s and others.
Q: What is the impact of tariffs and macroeconomic conditions on CN's guidance, and are you leaning towards the high or low end of the range? A: Tracy Robinson, CEO, stated that while uncertainty has increased, CN is on plan with a good start to the year. They expect to hit the guidance range as long as volume growth remains positive, with line-of-sight initiatives and easier comparisons in the second half supporting the outlook.
Q: Are there opportunities for Canada-Mexico trade amid current volatility, and how does CN's service compare to competitors? A: Remi Lalonde, Chief Commercial Officer, confirmed active engagement with customers on Canada-Mexico opportunities, leveraging interline partnerships. Derek Taylor, Senior Vice President, Transportation, noted seamless interchange in Chicago and excitement about new Gulfport service.
Q: How is CN managing labor and resources amid macro uncertainty and expected volume growth in the second half? A: Derek Taylor, Senior Vice President, Transportation, explained that CN has 470 furloughed employees, allowing flexibility to adjust resources as needed. The team is prepared to chase upside volume and make decisive actions if conditions change.
Q: What are the expectations for revenue per RTM given currency and mix headwinds? A: Tracy Robinson, CEO, expects revenue per RTM to remain positive for the year, supported by international intermodal growth and strong pricing across bulk and merchandise traffic.
Q: Are there any significant projects in the pipeline that have been delayed due to tariffs or macro conditions? A: Remi Lalonde, Chief Commercial Officer, mentioned Dow's pause on the Path to Zero project and ongoing discussions in the auto industry. However, CN continues to see strength in other areas, such as frac sand facilities and NGL exports.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
