Valued at a market cap of $92 billion, Canadian National Railway (TSX:CNR) is a railroad giant and one of the largest companies in the world. The TSX stock went public in November 1996 and has since returned 6,727% to shareholders. However, if we account for dividend reinvestments, cumulative returns are closer to 11,000%.
It means a $1,000 investment in CNR stock soon after it went public would be worth more than $110,000 today. As past returns don’t matter much to current investors, let’s see if you should own the blue-chip stock in 2025.
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Is Canadian National Railway stock a good buy right now?
Canadian National Railway operates as a vital transportation network in North America. Its comprehensive rail network spans coast to coast across Canada and extends deep into the United States.
Its company’s strategic advantage lies in its unique network, particularly its efficient routing around Chicago through the EJ&E railway and exclusive access to key ports like Prince Rupert and Halifax.
CN’s operations are diversified across several key sectors, which include the following:
- International and domestic intermodal for container shipping
- Forest products, leveraging North America’s largest forest products railcar fleet
- Metals and minerals transport from mining regions
- Grain and fertilizers connecting agricultural producers to global markets
- Coal transportation for both thermal and metallurgical uses
- Petroleum and chemicals serving major industrial centres
- Automotive shipping for finished vehicles and parts
Canadian National Railway operates on a scheduled railroading model, prioritizing efficiency and network fluidity. CN’s business strategy focuses on reinvesting in infrastructure safety and efficiency, maintaining a strong balance sheet, and returning value to shareholders through dividends and share repurchases. With its extensive network and diversified cargo portfolio, CN is crucial in facilitating North American trade and economic growth.
Canadian National Railway has successfully leveraged its strategic port access and extensive rail system to deliver sustainable growth and shareholder value. With an average haul length of over 700 miles and service to seven major ports, CN controls 65% of traffic originating and terminating on its network.
What is the target price for CNR stock?
Canadian National Railway has grown its revenue from $12.1 billion in 2014 to $17.2 billion in the last 12 months. Its free cash flow has increased from $2.1 billion to $3.6 billion in this period.
In 2023, Canadian National Railway demonstrated its financial strength by delivering $8.53 in diluted EPS, investing $3.1 billion in network improvements, and achieving a 14.5% adjusted return on invested capital.
The company’s growth story is far from over, given it is expected to invest almost $8 billion in capital expenditures over the next two years, driving future earnings and cash flow higher. Analysts expect adjusted earnings per share to expand from $7.27 in 2024 to $8.14 in 2025 and $9 in 2026. Moreover, free cash flow is on track to touch $4 billion in 2026.
A widening earnings and cash flow base should increase the company’s dividends over time. CN has already increased its annual dividends from $0.08 per share in 1997 to $3.38 per share in 2025, indicating a forward yield of 2.3%.
Canadian National Railway maintains a balanced approach to capital allocation, combining network investments with shareholder returns through consistent dividends and share-repurchase programs. Down 18% from all-time highs, CNR stock trades at a 20% discount to consensus price targets.
