Sometimes a falling stock price is trying to warn you. Other times, the market influences the business’s share price while it keeps happily making money.
Those are the dips worth investigating.
One Canadian blue-chip stock is now about 11% below the high it reached in late July. Yet since then, the company has raised its outlook, moved record volumes, and continued throwing off more cash. That disconnect is starting to look interesting.
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Dip, not a deal
A stock falling 10% or 20% only becomes attractive if the business can eventually justify a higher price. So before buying during a stock market correction, I want to see earnings holding up, cash flow improving, and a reason growth could continue.
Even better is a company with assets competitors can’t simply recreate. Try building nearly 20,000 miles of railway across North America. I’ll check back in a century. That brings me to Canadian National Railway (TSX: CNR).
Into earnings
CN connects Canada’s east and west coasts with the U.S. Midwest and Gulf Coast, moving everything from grain and energy products to vehicles and manufactured goods.
Its shares reached $185.25 on July 24. By September 21, they had fallen to $165.03, an 11% decline. The curious part? July 24 was also when CN reported a strong second quarter and increased its 2026 guidance.
Second-quarter revenue climbed 11% to $4.8 billion, while adjusted earnings per share rose 11% to $2.08. Revenue ton-miles, which measure how much freight CN moves and how far it travels, increased 5%. Management now expects adjusted earnings per share (EPS) to grow at a mid-to-high-single-digit rate this year, up from its previous outlook.
Getting stronger
Canada is moving a lot of grain. CN transported a record 33.8 million tonnes from Western Canada during the 2025–26 crop year. August then set another monthly record, with 2.5 million tonnes moved. For the new crop year, CN expects to ship between 30 million and 33 million tonnes of grain and processed products. More freight moving efficiently across the existing network can increase revenue without requiring CN to build another railway from scratch.
Cash generation is already improving. First-half free cash flow climbed 19% year over year to $1.8 billion, while CN repurchased about $1.3 billion of shares. Investors also receive a quarterly dividend of $0.92 per share, or $3.66 annualized, for a yield around 2.2%. CN calculates dividend growth of roughly 10% annually from 2021 through 2025. Reinvesting those payments among diversified Canadian blue-chip stocks can turn a modest starting yield into something considerably more useful over time.
Even so, railways follow the economy. A recession, weaker industrial production, tariffs, labour disruptions, or lower commodity shipments could slow volumes. CN’s second-quarter adjusted operating ratio also worsened slightly to 62.2% from 61.7%, meaning costs consumed a larger share of revenue. At roughly 19 times forward earnings, the stock isn’t being handed away either.
Bottom line
Still, I’d rather buy a quality business after an 11% retreat while earnings expectations are rising than after everyone decides the story looks wonderful again.
CN’s trains aren’t slowing down nearly as much as its share price has. For long-term investors, that gap could be the opportunity.
