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CN Railway Shares Post Biggest Drop Since 2021
Railroad's First-Quarter Revenue Misses Bloomberg Estimates as Trade and Tariff Issues Weigh on Results
Shares of Canadian National Railway slumped the most in more than four years after revenue came in below expectations, with the North American trade outlook still looking uncertain.
The Montreal-based railway reported revenue of C$4.38 billion ($3.2 billion) for the first quarter, down 1% from the previous year. Analysts surveyed by Bloomberg were looking for C$4.4 billion. Adjusted earnings were in line with projections.
CN shares were down 6% to C$147.91 as of 12:53 p.m. in Toronto, the biggest intraday decline since December 2021.
Revenue from grain and fertilizers was up 10% compared with the same period last year on record shipments, helped by the reduction of Chinese tariffs on canola. But U.S. tariff policies pressured the railway’s sales for metals and minerals shipments — down 11% from last year. Canadian National’s forest products and automotive segments dropped 12% and 5%, respectively.
The outcome of talks on the U.S.-Mexico-Canada Agreement is far from clear, CEO Tracy Robinson said.
“It’s impossible to predict where the whole discussions on the USMCA or the trade flows — even on the broader tariffs outlook — will land,” Robinson told analysts. “So we’ve assumed and continue to assume, as we look forward, that nothing will change.”
National Bank of Canada analyst Cameron Doerksen said in a note to investors that “muted volume and earnings growth this year and uncertainty around USMCA negotiations that could impact investor sentiment in the coming quarters inform our neutral view on the stock.”
As for higher fuel costs due to the war in the Middle East, CN Chief Financial Officer Ghislain Houle explained that they would be a headwind on earnings for the first half of this year. But they could help results in the second half, he said.
The company didn’t change its outlook for the year. Growth in revenue ton-miles — a workload metric — is expected to be flat. Canadian National assumes the Canadian dollar will be worth 73 U.S. cents this year, stronger than its January forecast of 71.5 cents.
CN’s operating ratio — a key gauge of railway efficiency that measures expenses as a percentage of revenue — ticked higher during the quarter to 64.6.
“Expectations for higher operating leverage following the strong performance across U.S. peers did not materialize in Q1, leading to an early sell-off in the shares,” RBC Capital Markets analyst Walter Spracklin said in a note to investors.
