Canadian National Railway (TSX:CNR) had a tough year in 2024 and the stock has continued to decline in 2025. Contrarian investors are wondering if CNR stock is now oversold and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on total returns.
CN stock price
Canadian National Railway trades near $135 per share at the time of writing compared to a 12-month high of around $175.
The pullback in 2024 was largely due to the impact of labour disputes and wildfires. Strikes at CN and Canadian ports last year and wildfires in Alberta disrupted operations. This forced some customers to divert shipments to ports in the United States. The interruptions also reduced volumes along the rail network and drove up expenses.
Despite the challenges, CN was still able to generate 2024 revenue that was roughly in line with 2023. Earnings, however, dipped about 5% due to higher expenses. The company’s operating ratio also moved higher, which means the business wasn’t as efficient.
CN just reported first-quarter (Q1) 2025 results that indicate some cautious optimism for this year. Revenue increased by $154 million, or 4% compared to Q1 2024. Operating income also increased by 4%. The operating ratio improved slightly, dipping to 63.4% from 63.6% in Q1 2024. Diluted earnings per share (EPS) rose 8% to $1.85.
Despite the uncertainty surrounding the trade negotiations between the United States and its two neighbours, CN still expects to deliver 10% to 15% diluted earnings per share growth in 2025 compared to last year. Capital expenditures are scheduled to be $3.4 billion, so the company isn’t cutting back on its planned investment. Compound annual adjusted diluted EPS growth is expected to be in the high single digits through 2026. CN did specify, however, that it sees higher recessionary risks than it did in January when it reported the 2024 results and the initial 2025 guidance.
Earlier this year, CN raised the dividend by 5%. This is the 25th consecutive annual dividend hike. The board also announced a plan to buy back up to 20 million shares.
Opportunity
Trade discussions between Canada and the United States are expected to pick up pace now that the Canadian election is over. It will take time to work out a new deal, but an agreement will eventually happen. If the negotiations conclude in the next few months, the U.S. and Canadian economies might only see a mild slowdown. In that scenario, CN would likely be able to hit its 2025 financial targets, and the stock should recover some lost ground.
Risks
The solid Q1 results might have been impacted by businesses rushing to get product moved before tariffs started. As such, the Q2 numbers might be weaker than expected if a chunk of the normal Q2 volumes shifted into the first quarter. A protracted and difficult trade negotiation between Canada and the United States, as well as between the U.S. and China, could cause a meaningful recession. In that situation, demand for CN’s services could decline, and the business would be at risk of missing its 2025 targets. Any negative guidance when the Q2 or Q3 report comes out would likely put additional pressure on the stock.
Should you buy CN now?
Near-term volatility should be expected, and a retest of the 12-month low is certainly possible. That being said, CN is probably an attractive pick at this level for a buy-and-hold portfolio. At some point, the trade deals will get settled, and future economic growth will drive higher demand for CN’s services. If you have some cash to put to work, CN deserves to be on your radar.
