Canadian National Railway (TSX:CNR) is down about 7% over the past year. 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.
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Canadian National Railway share price
CNR trades near $136.50 at the time of writing. The stock moved higher in a choppy pattern over the past few weeks, but has largely been under pressure since early 2024 when it traded near $180.
The results of trade negotiations between Canada and key trading partners, including the United States and China, will likely drive the story in 2026. CN operates nearly 20,000 route miles of tracks that connect ports on the Atlantic and Pacific coasts of Canada with the Gulf Coast in the United States.
Lumber, metals, automobiles, coal, crude oil, crops, fertilizer, and finished goods all move along CN’s network, enabling domestic economic activity and connecting buyers and sellers to international markets. Tariffs and the lingering negotiations with the United States forced CN to reduce its guidance in 2025. The company initially expected to deliver adjusted diluted earnings per share (EPS) growth of 10% to 15% in 2025. Investors are waiting to see the fourth-quarter (Q4) report to find out how the year finished. Expectations are for adjusted diluted EPS growth of 5% to 9%.
That’s not bad considering the challenges the business faced during the year. CN did a good job of streamlining the business and maintained its $3.35 billion capital program to position the business for growth.
Risks
The window for Canada to negotiate sector-specific deals with the United States to reduce tariffs on automobiles, metals, and softwood lumber has largely closed. Discussions will now likely get rolled in with the broader Canada-United States, Mexico Agreement (CUSMA) joint review that will occur this year. There is a risk that negotiations will drag out for at least the first six months of 2026 before the July 1 deadline for a decision on extending the agreement. This will make it difficult for businesses to plan investments or commit to non-essential orders. CN will likely provide cautious guidance for the year, given the ongoing uncertainty.
Another issue to watch is the planned merger of two major railways. Union Pacific (UP) hopes to get approval to acquire Norfolk Southern (NS). The US$85 billion deal would create the largest railway in North America with 50,000 route miles of tracks connecting 43 states and 100 American ports. This could lead to CN losing customers due to the reduced competition in the American market. In addition, freight flows could change with shippers switching away from ports on the Gulf Coast to ports on the east and west coasts of the U.S. that are connected to the extended network of the proposed new company.
Opportunity
At some point, a new trade agreement will be finalized between Canada and the United States. This will provide certainty for businesses and should boost demand for CN’s services.
The UP-NS merger might not get approved due to competition concerns. If it does get the green light, the impact on CN might not be as bad as some analysts predict. Economic growth could ensure strong demand across the industry, even if it is dominated by fewer players.
Time to buy CN?
Near-term volatility should be expected. That being said, CN remains a very profitable company, and much of the uncertainty is likely already reflected in the share price. The board has increased the dividend annually for the past 29 years, and that trend should continue.
If you have a contrarian investing style and are willing to ride out some volatility, CN probably deserves to be on your radar at this price level.
