Canadian National Railway Company

Second quarter reported diluted EPS was $2.06, up 10% year over year; adjusted diluted EPS was $2.08, up 11%, or $2.09, up 12% on an exchange-adjusted basis. Revenues were up 11% year over year on 5% RTM growth. Adjusted operating ratio was 62.2%, versus 61.7% last year; higher fuel prices had a 210 basis point unfavorable impact on OR. Year to date, free cash flow is up approximately 20%, or roughly $300 million, and leverage at the end of Q2 was 2.6x. For 2026, CN now expects low single-digit RTM growth and mid- to high single-digit adjusted diluted EPS growth. Management kept its WTI assumption at USD 80 to USD 110 per barrel, updated its FX assumption to $0.71 from $0.73, and kept its effective tax rate range at 25% to 26%.

Tracy Robinson emphasized that CN is delivering by focusing on what it can control: service, operational discipline, and commercial intensity. She said the railroad is running well, with productivity improvements, strong customer conversion, and improved fuel efficiency, and she raised the annual earnings outlook accordingly. Robinson also framed the Union Pacific agreements as strategic, saying they reduce merger-related risk to CN while opening longer-term growth opportunities into Mexico and, if approved, Kansas City.

Ghislain Houle said second-quarter results came in ahead of expectations and reflected strong operational and commercial execution. He highlighted the $2.06 reported EPS, $2.08 adjusted EPS, 62.2% adjusted OR, about $300 million of year-to-date free cash flow growth, and 2.6x leverage at quarter-end, while noting CN will stay opportunistic on its buyback and still targets 2.7x adjusted debt to adjusted EBITDA for 2026. He also pointed to labor being 3% higher, fuel expense about $250 million higher year over year, and purchase services/materials up 11% on advisory, trucking and vessel costs.

Analysts focused heavily on the Union Pacific MOUs, asking about market size, customer groups, capacity constraints, Chicago congestion risk, and what CN will do in the STB process. Management said the Mexico agreement gives CN direct access through Memphis and can start once the definitive agreement is signed, while the Kansas City rights are contingent on merger approval and include remedy protections for 2-to-1 and 3-to-2 customers. Questions also centered on fuel, guidance, and wildfires; CN said wildfire impacts were minimal, fuel should be a modest tailwind if current prices hold, and the stronger full-year EPS guide reflects better-than-expected volume, productivity, and service despite tougher comps later in the year.