Canadian Nationwide Railway (TSX:CNR) had a tough trip over the previous two years. Contrarian traders are questioning if CNR inventory is now undervalued and good to purchase for a self-directed Tax-Free Financial savings Account (TFSA) or Registered Retirement Financial savings Plan (RRSP) portfolio centered on dividends and long-term complete returns.
Canadian Nationwide Railway share value
Canadian Nationwide Railway trades close to $137 per share on the time of writing in comparison with $177 round this time in 2024.
The lengthy pullback within the inventory value is primarily attributed to a sequence of exterior challenges. Labour strikes at ports and wildfires disrupted operations in 2024. These occasions drove up prices, decreased working effectivity, and compelled some clients to search out options to maneuver their cargo.
In 2025, the story was all about commerce uncertainty. That theme is predicted to proceed by means of at the least the primary half of 2026. CN needed to cut back its steering final yr when it grew to become obvious {that a} commerce settlement between the USA and Canada was not going to happen earlier than the tip of the yr. Ideally, there would have been some early motion on the sector-specific tariffs positioned on aluminum, metal, and forestry merchandise. These points will now get rolled up within the broader Canada-U.S.-Mexico Settlement (CUSMA) negotiations. The three international locations must agree on an extension by July , or provide you with new agreements.
Buyers ought to put together for a bumpy trip.
Earnings
CN lately introduced its full-year 2025 outcomes. Income rose 2% to $17.3 billion in comparison with 2024. Adjusted diluted earnings per share (EPS) rose by 7%. That compares to the unique 2025 steering for adjusted EPS progress of 10% to fifteen%, so the affect of the commerce uncertainty on operations was significant. In actual fact, CN stated the damaging impact of tariffs on income was about $350 million final yr.
The corporate delivered a 1.2% enchancment in its working ratio in 2025. Free money circulation elevated by 8%.
CN took benefit of the depressed inventory value to purchase again 15 million shares, spending about $2 billion on the purchases.
Wanting forward, CN issued cautious steering for 2026 citing the continued uncertainty round commerce negotiations and tariffs. Adjusted EPS is just anticipated to rise marginally, however the firm will proceed to generate robust free money circulation.
The board introduced a 3% enhance to the dividend and CN intends to repurchase as much as 24 million shares over the subsequent 12 months. A discount within the capital program in comparison with 2025 will end in extra extra money.
CN has now elevated the dividend for 30 consecutive years.
Dangers
Ongoing commerce uncertainty will probably be a headwind for the corporate. Companies will maintain off making massive monetary commitments till there may be readability on tariff charges on merchandise shifting between Canada and the USA. CN’s intensive rail community covers almost 20,000 route miles connecting ports on the Atlantic and Pacific coasts of Canada to the Gulf Coast in the USA.
A proposed merger between Union Pacific and Norfolk Southern in the USA is one other potential menace. If the deal will get accredited it might create an American east-to-west rail big. Analysts are attempting to determine how the mixed operations would finally affect the general rail business. CN would probably lose some enterprise, relying on pricing and the routes clients would like to make use of to maneuver their cargo.
Alternative
Any information of a commerce settlement between the USA and Canada would doubtless give CN a very good increase. Within the meantime, Canada is working onerous to safe new buying and selling agreements with different international locations that would probably drive greater long-term cargo volumes alongside CN’s home community.
CN stays very worthwhile, regardless of the headwinds, and continues to return money to shareholders.
The underside line
Close to-term volatility is predicted, however a lot of the uncertainty is probably going already accounted for within the share value. Shopping for CN on large pullbacks has traditionally confirmed to be a worthwhile choice for affected person traders. In case you have a contrarian investing fashion, CN deserves to be in your radar for a buy-and-hold portfolio.
