Canadian National Railway (TSX:CNR) stock has faced a steady decline in 2025. Its stock is down 11.2% for the year and 8.6% for the past month. Canadian National Railway was once considered a gold standard blue-chip stock in Canada for its stable business and steadily growing dividend.
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Is Canadian National Railway still a premium blue-chip stock?
Yet, that ideal has come into question as the company has faced numerous challenges since the COVID-19 pandemic. CNR has faced quarter after quarter of disappointing results due to trade disruptions, fires, extreme cold, and labour disruptions.
Last year, it made projections for single-digit earnings-per-share growth, but then had to reduce guidance several times to almost no growth. Unfortunately, it has faced a similar dynamic in 2025.
Trump’s trade assault on Canada is particularly disruptive to Canadian National Railway. It has a large business moving goods between Canada and the United States, particularly on the eastern seaboard. Likewise, it has a large intermodal franchise, which has taken a hit from a changing trade environment between Asia and the U.S.
Recent quarterly results were lacklustre at best
In its most recent quarter, revenue ton miles (a metric of volume) declined 1%. Likewise, revenues decreased 1% to $4.27 billion. It still produced modest 2% earnings-per-share growth in the quarter, but it was not enough to please the market.
Canadian National Railway reduced its guidance (again) from low to mid-teens earnings-per-share growth to only mid- to high single-digit growth. Certainly, there are a lot of factors affecting its business that are out of its control. However, management starts to lose market credibility when it consistently reduces annual guidance repeatedly.
The one positive in the quarter was that CN was able to improve its operating ratio by 50 basis points to 61.7%. Certainly, becoming leaner in a challenging environment is a smart idea. The other positive is that the company continues to generate strong free cash flow.
Despite spending $1.3 billion in capital expenses year to date, CNR still generated $1.55 billion of cash. It has a free cash flow yield of 4.5%, which is near the highest it has been since 2020.
Is Canadian National Railway a good buy today?
So, it begs the question: Is Canadian National Railway a good buy here today? Canadian National is undoubtedly trading at a fair to attractive valuation. With a price-to-earnings ratio of only 16 times, it is trading considerably below its peers (Canadian Pacific Kansas City trades for 20 times) and below its longer-term average of 19.5 times.
Likewise, Canadian National Railway has an attractive 2.7% dividend yield right now. The company has an incredible record of growing that dividend by an 11% compounded annual growth rate. Today, CNR has a good balance sheet with ample flexibility.
However, if its growth rate remains hindered for the near term (two to three years), it is likely that its dividend-growth rate will have to significantly moderate (perhaps to the mid-single-digit range).
Recent news about significant rail mergers in the U.S. could potentially box CNR out of its top competitive routes. That is a risk that is only modestly reflected in the stock price today.
The Foolish bottom line
Given the lacklustre operating results, unreliable management projections, a challenging trade environment, and consistently missed earnings, Canadian National Railway has many challenges to overcome. As a result, it is probably a stock to avoid in the near term.
While its valuation and dividend are attractive, Canadian Pacific appears to have superior execution and higher growth potential (albeit at a higher valuation multiple) in the near and long term.
