Canadian National Railway (TSX:CNR) is one of the most established and resilient players in the North American transportation sector. However, after facing some challenges in 2024, investors are looking ahead to 2025 with cautious optimism. In this article, we’ll explore the company’s recent performance, key challenges, and what investors can expect from CN Rail stock in 2025.
A tough end to 2024: What happened?
Before diving into what 2025 holds, let’s first review Canadian National Railway’s performance at the close of 2024. The company reported its fourth-quarter (Q4) 2024 results on January 30, 2025, revealing a mix of struggles and resilience.
In Q4, CN Rail experienced a 3% volume decline in revenue ton miles, primarily due to challenging cold weather and labour disruptions in Canada. This led to a 3% drop in revenues, totaling $4,358 million. Operating income also took a hit, falling 10% to $1,628 million, while the operating ratio increased by 3.3%, hitting 62.6%. Adjusted earnings per share (EPS) dropped by 10%.
As a result, the stock pulled back by about 19% from its 2024 highs, reflecting a market correction due to the setbacks. At the current price of $146.63 per share, CN Rail’s price-to-earnings (P/E) ratio stands at a reasonable 20.4, offering a fair entry point for long-term investors.
Resilience despite setbacks: Full-year 2024 review
Despite the challenges faced in Q4, CN Rail’s full-year 2024 results demonstrate the strength and resilience of its business model. Volume growth for the year was up 1% compared to 2023, and the company’s revenue rose by 1% to reach $17 billion. Operating income, however, fell by 5%, and adjusted EPS decreased by 2%. Even so, the company’s adjusted return on invested capital (ROIC) remained solid at 13.1%, albeit down 1.4% from the previous year.
These results highlight the underlying stability of CN Rail’s core business, which continues to move critical goods across industries ranging from automotive to agriculture and consumer goods. Despite the challenges, the company has maintained a strong position in its sector, making it a good consideration for conservative investors looking for a long-term investment.
Looking ahead to 2025: What to expect
Canadian National Railway is poised for a potential rebound in 2025, with analysts and investors keenly watching for signs of recovery. The company has provided initial guidance, expecting adjusted EPS growth of 10–15% for the year. This optimistic outlook, coupled with a dividend hike, signals a commitment to long-term value for shareholders.
In a reassuring move, CN Rail raised its quarterly dividend by 5%, bringing the annualized payout to approximately $3.55 per share. This marks the company’s 29th consecutive year of dividend increases, a track record that sets it apart as a blue-chip stock.
While CN Rail’s yield of 2.4% isn’t considered high, its stable business and long history of dividend increases make it a solid choice for conservative investors. Even without any valuation expansion, the stock’s long-term growth potential could deliver annual returns of over 9%, which would be a solid outcome for a low-risk investment.
A positive outlook for 2025: Analysts are optimistic
Analysts are optimistic about CN Rail’s recovery in 2025. The consensus expects shares to appreciate by over 14% in the next 12 months, which would provide a total return of about 16% from current levels. This would be an impressive performance for a stock known for its stability and resilient earnings growth.
For investors seeking a low-risk, reliable stock with a growing dividend, Canadian National Railway may be a good candidate for accumulation in 2025.
