Shares of Canadian National Railway (TSX:CNR) have been really slumping over the past several years, now down just under 25% from 2024 all-time highs and gaining just 21% over the last five years. Indeed, the bear market slide has been exacerbated by Trump’s tariff threats, which could worsen as we head into the second half of 2025, with Trump stating that 25% tariffs on autos “could go up at some point.” Indeed, it’s tough to make much of such a comment. Either way, they’re not at all encouraging as Canada hopes to avoid a recession.
While it’s all too easy to throw in the towel on the railway giant as U.S.-Canada trade relations take more of a hit, I’m inclined to view the stock as a deep-value play while it’s going for just 19.2 times trailing price to earnings (P/E). The dividend yield is also the highest it’s been in recent memory, recently climbing above the 2.6% mark for the first time in a long time.
CN Rail dips to multi-year lows
While the stock has been a lacklustre performer for quite a while now, going virtually nowhere since mid-2020, I’d be inclined to stick with the name for its incredibly wide moat and sky-high barriers to entry. As one of the best long-term dividend growers in the country and a multiple that I believe no longer entails a premium, longer-term investors with a more than 10-year time horizon may wish to punch their ticket before shares have a chance to make up for what has been a last four years for the stock.
Indeed, shares of CNR could have more room to run lower as tariffs cut deeper into the top Canadian transport plays. That said, I’d be inclined to bet that the next eight years will probably be more rewarding for shareholders than the last eight.
Could the strategic plan help CNR stock get out of a historic rut?
Moving ahead, the firm could unlock operating efficiencies and regain its reputation as one of the most efficient railways in North America. Indeed, CN Rail stock may not be all too far off from getting back on the right track.
However, for now, it remains to be seen whether strategic investments can move the needle higher, especially in the face of profound economic headwinds. Of course, a new trade deal between Canada and the U.S. would be a huge boon for the industry. However, for now, it remains unclear when a deal can be struck in time to avoid a recession.
While CN Rail and its peers aren’t immune to the pains in the face of such downturns, I think that the eventual bounce-back has the potential to be fierce. Indeed, CNR stock recovered from the 2008 stock market crash rather quickly while suffering less downside than the S&P 500. While every recession is built differently (a tariff-driven one could leave a structural scar), I would not doubt CN’s ability to weather a storm.
The bottom line
It’s been through turbulent economic climates before, and it’s risen out of every time. With the stock in a bear market, I’d argue that some chance of a recession is already priced in, and shares may be in for relief once a recession is confirmed. Indeed, sometimes, it’s the anticipation of a downturn that weighs most heavily. In any case, I think CN Rail shares will be markedly higher in eight years’ time as it adopts next-gen tech to enhance efficiencies.
