Assessing CN's Resilience in a Volatile Trade Environment: A Strategic Buy Opportunity Amid Earnings Outperformance

In a world where trade wars, tariff volatility, and macroeconomic uncertainty dominate headlines, investors are on the hunt for companies that can weather the storm while delivering consistent returns. Canadian National Railway (CN) has emerged as a standout in this environment, combining operational efficiency, cost discipline, and margin resilience to outperform its peers. With a recent earnings report showcasing its ability to thrive under pressure, CN is shaping up as a defensive play—and a compelling near-term buy for those willing to bet on its strategic positioning.

The Numbers Tell the Story: Earnings Outperformance Amid Headwinds

CN's second-quarter 2025 results were a masterclass in resilience. Despite a 1% decline in revenue to C$4,272 million and a 1% drop in revenue ton miles (RTMs)—a key industry metric—the company managed a 5% increase in operating income to C$1,638 million. This was driven by a 2.3-point improvement in its operating ratio to 61.7%, a rare feat in a sector where margin compression is the norm. On an adjusted basis, the operating ratio improved by 0.5 points, underscoring CN's ability to control costs even as it navigated trade disruptions and a sluggish freight market.

What's more, CN's adjusted EPS grew 2% year-over-year to C$1.87, outpacing the sector average. While the company revised its 2025 EPS guidance to mid to high single-digit growth (down from its original 10%-15% target), this adjustment reflects prudence, not weakness. The midpoint of its new range still implies a 7%-9% return for shareholders—a solid return in a climate where many industries are bracing for contraction.

Operational Efficiency: CN's Secret Weapon

CN's success hinges on its relentless focus on cost discipline. The company reduced operating expenses by 5% year-over-year, driven by lower fuel costs and streamlined operations. Its operating expenses per gross ton mile (GTMs) fell to 2.24 cents from 2.35 cents in 2024, a 4.7% improvement that highlights its efficiency gains. This is critical in an industry where even minor cost savings can translate into significant margin protection.

Compare this to peers like CSX, which struggled with service disruptions and higher operating ratios due to infrastructure projects, or BNSF, which saw its costs climb amid volatile freight volumes. CN's ability to maintain a 61.7% operating ratio—just 0.3 points above its 2024 performance—despite a 1% revenue decline is a testament to its operational agility.

Defensive Positioning in a High-Uncertainty Landscape

CN's strategy isn't just about cost-cutting—it's about adaptability. The company has invested C$3.4 billion in 2025 capital projects, net of customer reimbursements, to future-proof its network. This includes upgrades to intermodal infrastructure and grain-handling facilities, positioning CN to capitalize on nearshoring trends and agricultural demand. Even as it removes its 2024-2026 financial outlook—a move reflecting caution—it's clear CN is prioritizing long-term reliability over short-term speculation.

The defensive case for CN is further strengthened by its customer relationships. CEO Tracy Robinson emphasized the company's role in supporting customers affected by trade volatility, ensuring they remain competitive in global markets. This isn't just altruism—it's a strategic move to secure long-term freight contracts and stabilize revenue streams. In a world where supply chains are increasingly localized, CN's ability to act as a reliable partner gives it a critical edge.

Why This Is a Buy Opportunity

While CN's adjusted EPS guidance is more conservative than initially projected, it still outperforms the broader industry. The company's operating ratio of 61.7% places it just outside the top tier of railroads (Union Pacific's 60% and Norfolk Southern's 62%), but its margin resilience in a down market is unparalleled. For investors, this means CN is not just surviving—it's thriving in conditions that would cripple less-disciplined operators.

The stock's valuation also tells a story. With a forward P/E of 14x and a dividend yield of 1.8%, CN offers a balance of growth and income. Given the current economic climate, where uncertainty is the only certainty, CN's ability to generate consistent cash flow and protect margins makes it a rare gem.

Final Take: Ride the Rails to Stability

CN's second-quarter performance and strategic adjustments paint a clear picture: this is a company that's not only surviving the macroeconomic turbulence but also positioning itself to outperform when conditions stabilize. Its cost discipline, operational efficiency, and customer-centric approach make it a defensive play in a high-uncertainty trade environment. For investors seeking a stock with both resilience and upside potential, CN is a name to watch—and a buy to consider.