The raised guidance and strong volume growth (especially grain and energy) signal continued operational momentum, but the 80bps operating ratio deterioration from fuel cost inflation and Moody's negative outlook are headwinds. Watch for STB developments on the UP network rights MOU and any escalation of USMCA trade tensions that could pressure cross-border volumes. The 2.61x leverage is manageable but trending higher.
Price Chart
Executive Summary
CN reported strong Q2 2026 results with revenue up 11% YoY to C$4,753M, diluted EPS up 10% to C$2.06, and raised 2026 guidance to mid-to-high single-digit adjusted EPS growth from prior 'slightly exceeding RTM growth'. The company also announced a Memorandum of Understanding with Union Pacific for network rights subject to STB approval, which could materially improve competitive positioning if the UP-NS merger proceeds. Operating ratio deteriorated 80bps to 62.5% due to fuel cost inflation, and Moody's changed its outlook to negative, partially offsetting the positive operational momentum.
Key Facts
- Revenue increased 11% YoY to C$4,753M in Q2 2026
- Diluted EPS increased 10% to C$2.06; adjusted diluted EPS up 11% to C$2.08
- Raised 2026 guidance: now expects mid-to-high single-digit adjusted EPS growth (prior: slightly exceeding RTM growth)
- RTMs grew 5% YoY in Q2 driven by grain (+11%) and petroleum/chemicals (+11%)
- Free cash flow for H1 2026 was C$1,842M, up 19% YoY
- Repurchased 2.9M shares for C$454M in Q2; 8.9M shares for C$1,323M in H1
- Signed MOU with Union Pacific for network rights between Canada and Mexico, subject to STB approval
- Moody's changed outlook from stable to negative; DBRS and S&P maintained stable outlook
- Operating ratio worsened 80bps to 62.5% due to fuel expense up 60% YoY
- Adjusted debt-to-adjusted EBITDA increased to 2.61x from 2.50x
Financial Impact
Revenue +C$481M (+11%), net income +C$77M (+7%), diluted EPS +$0.19 (+10%) vs Q2 2025
Risk Factors
- Moody's negative outlook could lead to a downgrade, increasing borrowing costs
- Fuel expense up 60% YoY; if crude stays above US$80/bbl, margin pressure continues
- USMCA renegotiation risk after US notification of non-renewal could materially impact cross-border volumes
- UP-NS merger approval could adversely impact CN's competitive position if network rights MOU is not approved
- Operating ratio deterioration trend (62.5% vs 61.7% prior year) suggests cost inflation outpacing revenue growth
Market Snapshot
Investment Themes
Documents Analyzed
This report is based on 8 SEC documents filed with EDGAR.
| Document | Accession Number |
|---|---|
| 6-K Filing (Primary) | 0000016868-26-000036 |
| Document: a2026q2fsnotes.htm | 0000016868-26-000036 |
| Document: a2026q2pressreleasestatssu.htm | 0000016868-26-000036 |
| Document: a2026q26k.htm | 0000016868-26-000036 |
| Document: a2026q2ceocfocertificates.htm | 0000016868-26-000036 |
| Document: 0000016868-26-000036-index-headers.html | 0000016868-26-000036 |
| Document: 0000016868-26-000036-index.html | 0000016868-26-000036 |
| Document: 0000016868-26-000036.txt | 0000016868-26-000036 |
Filters
| Type | Now | ||||
|---|---|---|---|---|---|
Sep 16, 2026 15d ago | Press Release | $119.49 $119.49 | · 0.00% | ▼ −2.56% | $117.16 (−1.95%) |
Aug 25, 2026 5w ago | 6-K | $127.12 $120.42 | ▼ −5.27% | ▼ −4.73% | $117.16 (−7.84%) |
Jul 24, 2026 10w ago | 6-K | $129.48 $127.13 | ▼ −1.81% | ▼ −2.19% | $117.16 (−9.51%) |
Jul 24, 2026 10w ago | Press Release | $129.48 $127.13 | ▼ −1.81% | ▼ −2.19% | $117.16 (−9.51%) |
Jul 22, 2026 10w ago | Press Release | $130.58 $127.13 | ▼ −2.64% | ▼ −3.12% | $117.16 (−10.28%) |
Jul 22, 2026 10w ago | Press Release | $130.58 $127.13 | ▼ −2.64% | ▼ −3.12% | $117.16 (−10.28%) |
Jul 3, 2026 12w ago | Press Release | $121.56 $124.34 | ▲ +2.29% | ▲ +1.36% | $117.16 (−3.62%) |
Jun 19, 2026 14w ago | Institutional Cluster | $114.13 $120.56 | ▲ +5.63% | ▲ +7.70% | $117.16 (+2.65%) |
Jun 5, 2026 16w ago | Press Release | $120.38 $118.98 | ▼ −1.16% | ▼ −1.73% | $117.16 (−2.67%) |
May 11, 2026 20w ago | Press Release | $110.60 $112.63 | ▲ +1.84% | ▲ +1.92% | $117.16 (+5.93%) |
US Market Status
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