Canadian National Railway (TSX:CNR) is down 16% in the past 12 months and recently hit a five-year low. 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 dividends and total returns.
Canadian National Railway share price
Canadian National Railway trades near $130 per share at the time of writing, compared to $180 at one point in 2024.
The pullback over the past 17 months has surprised some long-term CNR investors who are used to the stock holding up relatively well through turbulent economic and geopolitical times. In 2024, the pain largely came from labour strikes at CN and key ports it serves. In addition, CN had to contend with wildfires in Alberta that also disrupted operations. The combination of these issues resulted in CN delivering only a small revenue increase in 2024, while earnings fell compared to the previous year, due to a rise in expenses.
The start of 2025 brought some optimism from the company. In the fourth-quarter (Q4) 2024 earnings report released at the end of January, CN said it expected to deliver adjusted diluted earnings-per-share (EPS) growth of 10-15% this year compared to 2024. The story changed, however, when CN reported its Q2 2025 results. The new guidance for the year is for adjusted diluted EPS growth of mid- to high single digits while maintaining its $3.4 billion capital program.
Uncertainty created by the U.S. tariffs and trade negotiations is having a negative impact on CN. Businesses are deferring non-essential purchases, while tariffs impact shipments of commodities and finished goods between the U.S. and Canada. CN operates 20,000 route miles of tracks connecting ports on the Pacific and Atlantic coasts of Canada with the Gulf Coast in the United States.
Risks
Hopes for a quick resolution to the trade negotiations between the United States and Canada ended earlier this month when a U.S. deadline to get a deal done passed and new tariffs went into place. The longer the uncertainty persists, the more likely it is that the U.S. and Canada could slide into a recession. This would reduce demand for CN’s services.
Investors also need to keep an eye on the recent announcement of Union Pacific’s planned purchase of Norfolk Southern. The deal, if approved by regulators, would create an American rail giant with 50,000 miles of track that connects the east and west coasts of the United States.
Analysts are still trying to figure out how this would impact CN. The deal could lead to the loss of some customers if goods coming into Canadian ports in British Columbia divert to ports on the U.S. West Coast. CN currently has partnership agreements with both Union Pacific and Norfolk Southern. The combination of the two could impact those agreements.
Opportunity
The economic and trade risks might already be reflected in CN’s share price, especially now that the company has lowered guidance for the year. Any news of a comprehensive trade deal between the U.S. and China or Canada would likely bring investors back into the stock on the reduced uncertainty.
Regarding the UP-NS deal, a decision from regulators won’t likely come before the end of next year. If it gets blocked, CN’s share price could rally. If it gets the green light, the net impact might not actually be that bad. Reduced competition could enable CN to charge higher prices for some routes, and its network, which runs north-south through the U.S., would still need to connect with a combined UP-NS.
The bottom line
Near-term volatility is expected, but patient investors might want to start nibbling on CN at this level and look to add to the position on further weakness. Buying CN on large pullbacks has historically proven to be a savvy move for investors. At the current share price, investors can get a dividend yield of 2.7%. The board has increased the distribution annually for the past 29 years.
