CNR: Highlights from the RBC Canadian Industrials Conference

Research evidence excerpt

CNR: Highlights from the RBC Canadian Industrials Conference

ice. Looking further ahead, two important projects remain and are both targeted for completion

by end of 2027. The Zanardi Rapids Bridge at Prince Rupert — a new 1,600-foot, three-track structure partially funded by the

National Trade Corridors Fund (NTCF) — addresses a critical bottleneck currently constraining the corridor, which is currently

capped at 24 trains per day. Important here is that the NTCF funds need to be spent by 2028, which is a key driver to the project

happening this year. The Glen Valley–Abrahamson double track near Abbotsford fills in the last remaining section of single track as

trains exit the CN/CPKC Directional Running Zone, and is expected to deliver a similar step-change in fluidity and velocity through

Vancouver as the Edson Sub did in the West. Taken together, we see their 2027 completion setting the path for another round of

meaningful capacity enhancements, positioning CN for significant operating leverage when freight volumes recover.

Network fluidity improving early in Q2

Car velocity accelerating coming out of winter. We have seen an improvement in CN’s car velocity in April/May off a February/

March trough, which we believe supports our expectation for earnings growth to pick up in Q2. Car velocity was up 6% in Q1 and

is trending even higher in Q2. We continue to believe that if CN maintains favourable network fluidity trends, there is nice upside

potential to EPS growth, especially if we get some help from the macro. This combined with record levels of fuel efficiency provide

important company specific opportunities to drive earnings growth irrespective of the macro backdrop.

Price / Cost spread trending favourably

Pricing is trending ahead of inflation.