Description

Canadian National Railway: Can 12% T&E Productivity Gains Sustain A Buy Through Flat Volume Guidance?

Canadian National Railway Company reported a first quarter reflecting steady operational execution and ongoing commercial efforts amid a mixed macroeconomic environment. Volumes grew slightly, led by grain, potash, natural gas liquids (NGLs), and intermodal shipments, with a notable record set for grain movements. The company highlighted improvements in key operating metrics, including a 6% increase in car velocity, a 4% reduction in dwell time, and a 6% rise in train speed compared to the prior year. Such enhancements contributed to better asset utilization and productivity—12% higher train and engine (T&E) productivity and 8% improved locomotive productivity—while maintaining locomotive availability at 91%. Labor costs on a per revenue ton mile (RTM) basis declined by 7%, despite modest wage increases, driven by a 4% headcount reduction.