Can CAN sustain its earnings growth into next year?

Canadian National (CNI) faces challenges in sustaining its earnings growth into next year. Here's why:

1. Recent Performance and Challenges: CNI's recent quarterly earnings have fallen short of expectations. For instance, in Q4 2024, the company reported an EPS of $1.82, which was a 10% decrease year-over-year. Additionally, the operating ratio increased by 330 basis points, indicating inefficiencies. The company also faced disruptions due to labor disputes and port strikes, impacting volume and financial performance.
2. Volume and Revenue Decline: In Q4 2024, CNI experienced a 3% decline in overall volume and revenue, partly due to lower potash shipments and softer demand for forest products. This trend suggests potential headwinds in sustaining revenue growth.
3. Strategic Initiatives and Investments: While CNI has announced significant investments, such as a $3.4 billion capex program for 2025, these initiatives may not immediately translate to earnings growth. The company's free cash flow was approximately $3.1 billion for the full year, which was lower than the previous year. The allocation of free cash flow to shareholder returns and balance sheet management may limit the immediate capacity for reinvestment in growth initiatives.
4. Market Conditions and Outlook: The broader market conditions, including potential rail strikes and disruptions in the supply chain, have impacted CNI's performance. These external factors may continue to influence the company's ability to sustain earnings growth.
5. Analyst Expectations: Analysts have lowered earnings estimates for CNI, with a forecast of $6.55 per share for FY2025, down from previous estimates. This reflects a more cautious outlook on the company's future earnings potential.

In conclusion, while CNI has made efforts to invest in growth and return value to shareholders, the current performance indicators, coupled with external market challenges, make it uncertain whether the company can sustain its earnings growth into next year at the same pace as recent past years.