You know the saying “steady as a rail”? Well, there’s a reason that saying exists, of course. A train isn’t going to go off the tracks unless there’s a real catastrophe. Yet that doesn’t only apply to the physical trains themselves, but also to the companies themselves. That’s why these tend to make the best investments if you’re worried about getting to sleep at night.
That’s why Canadian railway stocks provide some of the best and biggest opportunities for long-term investment. Yet of the two involved in today’s duopoly, the one that best exemplifies “steady as a rail” has to be Canadian National Railway (TSX:CNR).
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Why CNR?
CNR stock is one of the best options, as well as the oldest. CNR stock first came on the scene over 100 years ago in 1919, when the Canadian government established it. After merging with several other financially troubled railways, the company stabilized the country’s railway system. It went on to be privatized in 1995, becoming one of the largest publicly traded railroads in North America.
Fast forward, and the stock is just as strong as ever. The Class 1 freight railroad operates in rail, intermodal, trucking, and supply chain services across Canada and the United States. It now has about 20,000 route miles across both these countries and continues to find new opportunities to expand.
Into earnings
This growth was witnessed during the company’s recent earnings report. During the second quarter, CNR stock reported operating income that rose 4% to $1.64 billion. There was a slight drop of 1% in revenue, but the company effectively managed costs, with an improved operating ratio of 61.7%.
Furthermore, CNR stock reported diluted earnings per share (EPS) of 7% at $1.87. So, even amidst the challenges, the stock managed to generate high profitability. All while planning to invest $3.4 billion in its capital program to improve infrastructure and operations, showing its commitment to long-term growth.
Looking ahead
Now, to be clear, the company did revise its 2025 guidance due to ongoing economic uncertainty. This was particularly tied to both trade and tariff issues. It now expects EPS to grow from mid- to high single digits, down from 10% to 15% growth. Furthermore, CNR stock opted to forego financial outlooks for 2024 to 2026 due to macroeconomic volatility factors.
Yet even so, the stock remains a strong long-term option, especially for those seeking value. CNR stock currently trades at 18.45 times earnings, which is quite reasonable considering its growth plans. In fact, its enterprise value even suggests that it could be undervalued, with an enterprise value-to-revenue ratio of 6.07. Add in a 2.65% dividend yield, and this is a stock that just looks like it’s going to keep on winning.
Bottom line
All together, CNR stock is the gift that keeps on giving. With over 100 years of growth, dividends for days, and more growth to come, investors looking for a balanced and safe investment would do well to consider CNR stock on the TSX today, especially if you’re looking to get a better sleep at night.
