CNR Reported Disappointing Q4 Earnings [Last Update]

Update 2025 Mar 5th I have decided to gradually divest CNR given the ample investment opportunities that exists in the market due to recent market corrections. As a result, I will stop following the company closely. I still think the company will perform well long term given the moat, but the poor performance of recent years bring doubts to the ability of the current management.

Update 2025 Feb 4th Analysis

Canadian National Railway CNR has had a challenging quarter in 2024 Q4, EPS has declined 10% to $1.82 per share and revenue declined 3% to $4.358 billion. The decline is mainly caused by consecutive strikes happened in 2024, first a rail shutdown in August, followed by a port strike in November.

While I fully support workers get paid properly, I believe the negotiation process should be improved to avoid consecutive work disruptions like what happened in 2024, as this not only damages companies like CNR, it also damages the reputation of Canada as a reliable trading partner. And a damaged reputation will result in less businesses, and less jobs for Canadians.

I am personally not satisfied with the performance, but I plan to continue holding CNR for another year to see if the management can perform as promised. If the management failed to improve the earnings, or labor disruptions happen again in 2025, I will likely start reducing my positions in CNR and invest the capital elsewhere.

Regarding the US tariffs, I’m not really worries about it too much as recent development has proved that both side are willing to step back and negotiate. US has delayed the tariff implementation for a month as a result.

Here are some positive development in Q4 2024:

Approval of Iowa Northern acquisition, this will result in rail network expansion, and a stronger moat for CNR.
The company continues to invest in the rail network, completed double tracks in various location that will improve the capacity significantly.
Negotiation with the unions seems to be going well so far.

The fair value of CNR stock is about $168.95, suggesting a 13.60% CAGR in the next 5 years (assuming no significant disruptions to the operations). Here are the assumptions of the DCF calculation:

Latest TTM Free Cash Flow (FCF) of $3.578 Billion
FCF growth rate of 10% (5YR AVG 10.11%)
2% Share repurchase (5YR AVG 2.64%)
Future Price/FCF ratio of 25 (5YR AVG 30)
Discount rate of 10%

You can also see my past CNR stock analysis here

Holdings Disclosure

SoloFIRE CNR ownership: 4% of portfolio
SoloFIRE CNR Average Cost Paid: $156.05
CNR price as of writing: CA$145.66
Holding time: 2 years

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DISCLAIMER: Solofire is not a registered financial advisor. This post contains author's personal opinion only and it should NOT be considered financial advice.