CNR: Share Buybacks Will Support Earnings Compounding Amid Modest Macro Risks

Analysts have modestly raised their price target on Canadian National Railway, lifting estimated fair value by about C$4 to roughly C$155. This reflects slightly stronger expectations for revenue growth, margin expansion, and a lower future earnings multiple.

Analyst Commentary

Analysts generally view the modest price target increase as a measured vote of confidence in Canadian National Railway, emphasizing the company’s ability to compound earnings over time through disciplined capital allocation and steady operational improvements.

Recent commentary highlights that the current valuation embeds only moderate expectations for volume recovery and efficiency gains, leaving room for upside if management continues to execute on cost controls and service reliability initiatives.

Bullish Takeaways

• Bullish analysts point to the company’s diversified freight mix across key North American corridors as a structural advantage that supports resilient revenue growth through economic cycles.
• Improving operating ratios and ongoing productivity initiatives are viewed as catalysts for margin expansion, which could justify a higher earnings multiple over time.
• Disciplined capital spending on network capacity and technology is expected to enhance service quality and pricing power, supporting mid single digit to high single digit earnings growth beyond the near term.
• With leverage remaining manageable and strong free cash flow generation, bullish analysts see continued capacity for share repurchases and dividend growth, reinforcing the total return profile implied by the new target.

Bearish Takeaways

• Bearish analysts caution that the higher price target already assumes a relatively smooth macro backdrop, leaving the shares vulnerable if industrial production or cross border trade volumes soften.
• There is concern that labor, fuel, and regulatory cost pressures could offset planned efficiency gains, limiting the extent of margin expansion embedded in current forecasts.
• Competitive pressures from trucking and other rail operators, particularly on key long haul lanes, may constrain pricing power and weigh on revenue per carload over time.
• Some bearish analysts argue that the stock’s valuation premium to historical averages leaves less room for error on execution, making any operational missteps or service disruptions more likely to trigger multiple compression.

What's in the News

• Completed a share repurchase of 9,900,000 shares, or 1.58% of shares outstanding, for CAD 1,341 million under the buyback announced on January 30, 2025 (company disclosure).
• Between July 1 and September 30, 2025, repurchased 7,700,000 shares, representing 1.23% of shares outstanding, for CAD 1,041 million as part of the ongoing buyback program (company disclosure).

Valuation Changes

• The fair value estimate has risen slightly from approximately CA$150.57 to CA$154.85, reflecting a modestly higher intrinsic value for the shares.
• The discount rate has fallen marginally from about 7.52% to 7.47%, slightly lowering the hurdle rate applied in the valuation model.
• Revenue growth has edged higher from roughly 4.38% to 4.45%, indicating a small upward revision to long term top line expectations.
• The net profit margin has increased modestly from around 28.70% to 29.04%, signaling improved assumptions for operating efficiency and profitability.
• The future P/E has declined slightly from about 20.4x to 19.6x, implying a somewhat more conservative multiple applied to forward earnings.