Canadian National Railway (TSX:CNR) had a rough ride over the past two years. Contrarian investors are wondering if CNR stock is now undervalued and good to buy for a self-directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on dividends and long-term total returns.
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Canadian National Railway share price
Canadian National Railway trades near $137 per share at the time of writing compared to $177 around this time in 2024.
The long pullback in the stock price is primarily attributed to a series of external challenges. Labour strikes at ports and wildfires disrupted operations in 2024. These events drove up costs, reduced operating efficiency, and forced some customers to find alternatives to move their cargo.
In 2025, the story was all about trade uncertainty. That theme is expected to continue through at least the first half of 2026. CN had to reduce its guidance last year when it became apparent that a trade agreement between the United States and Canada was not going to occur before the end of the year. Ideally, there would have been some early movement on the sector-specific tariffs placed on aluminum, steel, and forestry products. Those issues will now get rolled up in the broader Canada-U.S.-Mexico Agreement (CUSMA) negotiations. The three countries have to agree on an extension by July , or come up with new agreements.
Investors should prepare for a bumpy ride.
Earnings
CN recently announced its full-year 2025 results. Revenue rose 2% to $17.3 billion compared to 2024. Adjusted diluted earnings per share (EPS) rose by 7%. That compares to the original 2025 guidance for adjusted EPS growth of 10% to 15%, so the impact of the trade uncertainty on operations was meaningful. In fact, CN said the negative effect of tariffs on revenue was about $350 million last year.
The company delivered a 1.2% improvement in its operating ratio in 2025. Free cash flow increased by 8%.
CN took advantage of the depressed stock price to buy back 15 million shares, spending about $2 billion on the purchases.
Looking ahead, CN issued cautious guidance for 2026 citing the ongoing uncertainty around trade negotiations and tariffs. Adjusted EPS is only expected to rise marginally, but the company will continue to generate strong free cash flow.
The board announced a 3% increase to the dividend and CN intends to repurchase up to 24 million shares over the next 12 months. A reduction in the capital program compared to 2025 will result in more excess cash.
CN has now increased the dividend for 30 consecutive years.
Risks
Ongoing trade uncertainty will be a headwind for the company. Businesses will hold off making large financial commitments until there is clarity on tariff rates on products moving between Canada and the United States. CN’s extensive rail network covers nearly 20,000 route miles connecting ports on the Atlantic and Pacific coasts of Canada to the Gulf Coast in the United States.
A proposed merger between Union Pacific and Norfolk Southern in the United States is another potential threat. If the deal gets approved it would create an American east-to-west rail giant. Analysts are trying to figure out how the combined operations would ultimately impact the overall rail industry. CN would potentially lose some business, depending on pricing and the routes customers would prefer to use to move their cargo.
Opportunity
Any news of a trade agreement between the United States and Canada would likely give CN a good boost. In the meantime, Canada is working hard to secure new trading agreements with other countries that could potentially drive higher long-term cargo volumes along CN’s domestic network.
CN remains very profitable, despite the headwinds, and continues to return cash to shareholders.
The bottom line
Near-term volatility is expected, but most of the uncertainty is likely already accounted for in the share price. Buying CN on big pullbacks has historically proven to be a profitable decision for patient investors. If you have a contrarian investing style, CN deserves to be on your radar for a buy-and-hold portfolio.
