Shares of Canadian National Railway Co. experienced their steepest decline in over four years after the company's first-quarter revenue fell slightly short of expectations, reflecting ongoing uncertainty in North American trade dynamics.
Revenue Miss and Stock Drop
The Montreal-based railway reported revenue of $4.38 billion for the first quarter, a one percent decrease from the same period last year. Analysts surveyed by Bloomberg had anticipated $4.4 billion. Adjusted earnings, however, met projections. As of 12:10 p.m. in Toronto, CN shares were down six percent to $147.91, marking the largest intraday drop since December 2021.
Operating Efficiency and Segment Performance
CN's operating ratio, a key measure of railway efficiency that tracks expenses as a percentage of revenue, rose to 64.6 percent during the quarter. Revenue from grain and fertilizers increased by 10 percent year-over-year, driven by record shipments and reduced Chinese tariffs on canola. Conversely, U.S. tariff policies negatively impacted sales in metals and minerals, forest products, and automotive segments, which fell by 11 percent, 12 percent, and five percent, respectively.
Analyst and Executive Commentary
National Bank of Canada analyst Cameron Doerksen noted in a report that "muted volume and earnings growth this year and uncertainty around CUSMA negotiations that could impact investor sentiment in the coming quarters inform our neutral view on the stock." Chief Executive Tracy Robinson addressed the trade environment during a conference call, stating, "It's impossible to predict where the whole discussions on the USMCA or the trade flows — even on the broader tariffs outlook — will land. So we've assumed and continue to assume, as we look forward, that nothing will change."
Outlook and Currency Assumptions
The company maintained its full-year outlook, with revenue ton-miles—a workload metric—expected to remain flat. Canadian National now anticipates the Canadian dollar will average 73 cents U.S. this year, slightly stronger than its January forecast of 71.5 cents. JPMorgan analyst Brian Ossenbeck commented that the new foreign exchange assumption represents a "minus one percent earnings per share headwind relative to the previous guide."
Shares of rival Canadian Pacific Kansas City, which reports later Wednesday, fell 1.7 percent in Toronto as of 12:10 p.m.
