Canadian National Railway Co. (CNR)

Equity Research 24 July 2026 | 1:14PM EDT

Canadian National Railway Co. (CNR.TO): 2Q26 EPS Beat; FY26 EPS Growth Guide Raised to MSD-HSD (vs ~MSD Consensus)

Bottom Line: CNI (Sell) reported 2Q26 adjusted EPS of C$2.08 (reported EPS of Jordan Alliger | $2.06 included $17M related to advisory costs related to rail consolidation Goldman Sachs & Co. LLC matters) compared to C$1.95/C$1.96 estimates for GSe/FactSet Consensus. Andrzej Tomczyk, CFA Adjusted OR of 62.2% was ~120 bps ahead of our forecast of 63.4% (110 bps better | than the 63.3% consensus forecast) on revenues that were +3% above our forecast Goldman Sachs & Co. LLC

and consensus; the better-than-forecast OR on above-forecast revenue led to Paul Stoddard | overall EBIT +7% above our forecast and +6% above consensus. Goldman Sachs & Co. LLC We shifted our investment recommendations to favor the trucking sector (LTL/TL over rails) at or near the end of an extended freight recession (see Pivot to Trucking and Recently Raised Estimates/Blue Sky); while we think CN can continue to improve operationally (and it does appear they are doing a good job to date in 2026) as volumes recover, we see more torque in the trucking side of the equation versus the more defensive rail sector and as margin levels are closer to bottoming in TL/LTL.

n EPS growth of up MSD-HSD YoY based on LSD revenue-ton-mile growth expectations (raised from prior guide of EPS growth slightly above flattish volume growth expectations) compared to +5% EPS growth expectations for consensus coming into the print and +4% GS estimates. n With ~25 cents of expected net fuel benefit to EPS into 2H (15/10 cents tailwind in 3Q/4Q) weighed against 4 cents of experienced drag in 1H (4/0 cents drag in 1Q/2Q), CN’s implied FY26 EPS benefit from fuel is ~21 cents, or roughly ~3% CN’s FY25 EPS. o This implies that at least some portion of the raised EPS guide is driven by fuel (as 3% itself is ~LSD growth). o We mention the above, as it is conceivable fuel-related surcharge benefits could wind up creating tougher comps down the road for transports broadly in 2027 (depending on where fuel settles) given the possibility that some make money on fuel (note for example that we calculate peer UNP’s fuel surcharge benefit at ~13 cents in the recent 2Q).

Results: We note that below-forecast expenses within purchased services, equipment/rents and casualty/other were the primary drivers of the better OR vs GSe (combined ~180bps below forecast), partly offset by above-forecast expenses

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Goldman Sachs Canadian National Railway Co. (CNR.TO)

within Fuel (~80bps above forecast). Above-forecast yield growth (rev per carload +12% YoY vs +10% YoY forecast) against relatively inline carload growth (-0.4% YoY vs -0.8% GSe) and higher non-freight revenue ($194M vs $140M GSe and $112M in 1Q26) ultimately drove higher overall revenue growth vs GSe. The company noted Fuel was not impactful to EPS on net in the 2Q (versus 4 cents of headwind to 1Q).

Current Trends: CN’s positive carload growth trajectory of +2% in 1Q moderated into the 2Q26 with carload growth at -0.4% YoY (note that CN previously noted that 1Q experienced some possible pull-forward demand), though revenue-ton-mile growth remained solid at +5% YoY; while carload growth is ~flat YoY on a YTD basis thus far through 3Q, CN’s RTM growth is tracking at up ~4% YoY, or above its previously targeted guide of ‘flattish’ RTM growth for the year, and hence the reason CN updated its EPS growth guide for the year (EPS growth expectations of ~MSD-HSD YoY now based on higher volumes to date). CN noted that tougher comps in 4Q is one reason why its RTM growth guide is LSD, or…