Investors seeking long-term stability often turn to railroad stocks, but choosing between Canadian National Railway (TSX:CNR) and Canadian Pacific Kansas City (TSX:CP) can seem daunting. Both dominate the Canadian rail landscape and offer exposure to continental trade. Ultimately, it comes down to weighing established efficiency against new transnational expansion potential.
Canadian National Railway offers a massive network connecting three North American coasts, providing a high level of operational stability. Canadian Pacific Kansas City recently created the first single-line rail network linking Canada, the U.S., and Mexico.
Let’s take a look at their similarities and differences.
Source: Getty Images
The case for Canadian National Railway
With roughly 24,000 employees, CNR focuses on delivering high-quality transportation and logistics services across North America. It operates a vast network of 20,000 route-miles, providing critical links to the Atlantic, Pacific, and Gulf coasts. The business serves diverse markets such as resource extraction, manufacturing, and general consumer goods, positioning it as a backbone of the regional economy.
In FY 2025, the company reported revenue of nearly $17.3 billion, about 2% higher compared with the prior year. Its net income of $4.7 billion demonstrated consistent performance in a fluctuating economic environment. These results led to a net margin of about 27.3%.
On the December 2025 balance sheet, the debt-to-equity ratio of roughly 1 showed how much the business relied on borrowed funds compared with shareholder equity. The current ratio, which measures the ability to cover short-term debts with current assets, was close to 0.7. Free cash flow (the cash remaining after paying for capital expenditures) was nearly $3.4 billion.
The case for Canadian Pacific Kansas City
CP operates the only single-line transnational freight railway connecting Canada, the United States, and Mexico. This unique network services critical commodities like grain, energy, and automotive parts for major customers including Nutrien (TSX:NTR) and K+S Potash Canada. By bypassing the need to hand off freight at borders, the company offers its clients a more seamless shipping experience.
For FY 2025, the company generated revenue of nearly $15.1 billion, representing a year-over-year growth of roughly 3.7%. Net income for the period was close to $4.1 billion, showing steady earnings power as the network integration matures. This performance resulted in a net margin of about 27.5%.
According to the December 2025 balance sheet, the company maintained a debt-to-equity ratio of roughly 0.5. This lower ratio indicates a conservative use of debt relative to shareholder equity compared to many other industrial stocks. The current ratio was approximately 0.5, and free cash flow reached close to $2.2 billion.
Risk profile comparison
Canadian National Railway faces risks related to the cyclical nature of the commodities it transports, meaning an economic slowdown could reduce shipping volumes. Fluctuations in fuel prices can also impact operating costs, though the company often uses surcharges to mitigate this. Additionally, the business competes for market share with major peers like Union Pacific (NYSE:UNP) and the trucking industry.
Canadian Pacific Kansas City faces significant integration risks as it works to fully realize synergies from its recent merger (Canadian Pacific acquired Kansas City Southern in 2023). Because of the merger, the company is under strict oversight from the U.S. Surface Transportation Board. It also has to navigate political and legislative shifts in Mexico. Finally, it competes directly with CSX (NASDAQ:CSX) and Norfolk Southern (NYSE:NSC) for freight traffic across the eastern United States and southern borders.
Valuation comparison
Canadian National Railway trades at a lower P/E (price versus earnings) and a lower P/S (price to sales) ratio than its rival.
| Metric | Canadian National | Canadian Pacific |
| P/E | 22.6 | 29.4 |
| P/S | 6.1 | 7.4 |
Dividend comparison
Currently, Canadian National Railway pays a 2.08% dividend yield, and Canadian Pacific Kansas City’s yield is 0.84%.
Which railroad stock would I buy in 2026?
If I had to choose just one in August 2026, I’d pick Canadian National stock. Canadian Pacific’s Canada-U.S.-Mexico network offers strong growth potential, but investors currently have to pay a higher valuation for it. CNR stock, meanwhile, offers stronger free cash flow, a higher dividend yield, and cheaper valuation multiples. For me, that combination of value, higher dividend income, and financial strength gives CNR stock the edge today.
