CN Ramps Up: Strategic Pacts with Union Pacific and Raised Guidance Signal Confidence

A Quarter of Strong Execution

Canadian National (CN) delivered another standout quarter, with EPS growth of 12% on an FX-adjusted basis and 5% volume growth. The company raised its full-year guidance to mid-to-high single-digit adjusted EPS growth on the back of low single-digit RTM growth, reflecting confidence in its operational and commercial momentum. As CEO Tracy Robinson put it, “The engine is running well. We're executing against our strategy, and we can see the results.” — Tracy Robinson, President and CEO · 2026-07-24 This is a company that is not just riding a favorable market but actively capturing value through improved productivity and pricing discipline.

The quarter was marked by record grain volumes, strong potash shipments, and an 11% year-over-year increase in petroleum and chemicals RTMs, driven by the new GTA fuel terminal and expanded NGL exports via Prince Rupert. The company's focus on energy and agricultural commodity flows is clearly paying off, and the Energy Products momentum in the market is mirrored in CN's own results.

The Union Pacific Agreements: A Strategic Expansion

The most significant news of the call was the announcement of two agreements with Union Pacific that structurally extend CN's network. The first is a commercial agreement granting CN new rights for volumes between Canada and Mexico via Memphis, while the second is a settlement agreement contingent on regulatory approval of the UP-NS merger, providing CN access to Kansas City and the use of UP's Neff Yard. As Tracy explained,

These agreements are strategic and they bring long-term benefits. Now for CN, they structurally enhance and extend our network by giving us direct and very competitive access to important markets in Kansas City and Mexico.

In response to an analyst's question about the opportunity, Tracy noted, “I think it's in the area of $3 billion. So we're getting organized on what that push is going to look like.” — Tracy Robinson, President and CEO · 2026-07-24 This is a meaningful expansion that leverages CN's existing capacity and creates new growth avenues without heavy capital investment. The Rail Products theme resonates here, as the company is essentially adding new routes to its rail product offering, enhancing its competitive position.

Energy and Tariff Tailwinds

CN's energy franchise remains a core growth driver. Janet Drysdale, Chief Commercial Officer, highlighted the strength in refined products, “I think what we're seeing is a lot of strength in the refined products. So that's mainly gasoline and diesel. And of course, that's associated with our new GTA fuel terminal.” — Janet Drysdale, Chief Financial Officer · 2026-07-24 The company is also benefiting from the broader Tariff refund environment, as it has been adept at mitigating tariff impacts through supply chain changes and new trade flows. While the market's focus on tariff refunds is global, CN has managed to turn tariff challenges into opportunities, particularly in metals and minerals, by shifting to longer-haul domestic lanes.

This aligns with the broader industry narrative. In the global trajectory, Tariff refund appears as a high-momentum keyword, and CN's ability to navigate the tariff landscape is a testament to its commercial agility. The company also benefits from rising energy prices, which have historically been a tailwind for its fuel surcharge mechanism.

Productivity and Cost Discipline

Operating performance was equally impressive. Pat Whitehead, COO, reported a 6% improvement in locomotive productivity and a 13% improvement in train-and-engine employee productivity, contributing to a record first-half fuel efficiency. The company's Fast Track initiative has already delivered close to $100 million in realized benefits. This operational excellence is translating directly into financial results, with free cash flow up approximately 20% year-to-date. As Ghislain Houle noted on the call, “the engine is running well” and the company is achieving earnings leverage from volume growth.

This cost discipline is not new. In the prior quarter, Tracy had emphasized the importance of operating leverage, stating, “I am very happy with the operating leverage that this team is producing.” — Tracy Robinson, President and CEO · 2026-04-29 That focus continues to pay off, even as the company raises its guidance.

Given the strategic agreements and the momentum in energy and ag, CN is positioning itself for long-term growth. The company's confidence is reflected in its raised guidance, despite acknowledging tougher comps in Q4 and ongoing macro uncertainties. As Janet noted in January, “we are out there beating the bushes everywhere,” — Janet Drysdale, Chief Commercial Officer · 2026-01-30 and that persistence is now yielding results. With the network extensions and a strong first half, CN appears well poised to deliver another year of solid shareholder returns.