CN’s third-quarter EPS climbs 9% but operating ratio worsens (NYSE: CNI)

What happened

Canadian National Railway Company (NYSE: CNI), or CN, reported third-quarter 2026 diluted earnings per share of C$2.00, up 9% from C$1.83 a year earlier. Revenue rose 15% to C$4.77 billion from C$4.17 billion, but net income grew only 6% to C$1.21 billion.

Adjusted diluted EPS, a non-GAAP measure, was C$2.16, up 18% and 17% at constant currency. The adjustments remove a C$118 million impairment on dispatching and back office software projects that CN discontinued. They also remove C$14 million of advisory costs for the U.S. Surface Transportation Board review of the potential Union Pacific and Norfolk Southern merger.

Traffic grew 4%, with revenue ton miles at 59,383 million. Carloads slipped to 1,364 thousand from 1,368 thousand. Freight revenue per ton mile rose 10% to 7.70 cents, so revenue per unit of volume grew much faster than volume.

Key numbers

Metric	Latest	Change	Source
Diluted EPS, third quarter	C$2.00	from C$1.83, +9%	CN Q3 2026 earnings news release (SEC 6-K)
Adjusted diluted EPS, third quarter	C$2.16	from C$1.83, +18%	CN Q3 2026 earnings news release (SEC 6-K)
Revenues, third quarter	C$4.77 billion	from C$4.17 billion, +15%	CN Q3 2026 earnings news release (SEC 6-K)
Operating ratio, third quarter	63.7%	from 61.4%, +230 basis points	CN Q3 2026 earnings news release (SEC 6-K)
Free cash flow, first nine months	C$2.92 billion	from C$2.34 billion, +25%	CN Q3 2026 earnings news release (SEC 6-K)

Read more: Canadian National Railway (CNI) company research

Where the margin went

The reported operating ratio worsened to 63.7% from 61.4%, up 230 basis points, even though operating income rose 8% to C$1.73 billion. The ratio is operating expenses as a share of revenue, so a higher number means CN keeps less of each dollar of sales.

The adjusted picture is better. Adjusted operating income rose 16%, and the adjusted operating ratio improved 40 basis points to 61.0%. The adjustments account for 2.7 percentage points of the reported ratio.

Fuel was the largest increase among operating expenses. Fuel expense reached C$662 million against C$418 million a year earlier, and the average fuel price was C$6.09 per US gallon against C$3.82. Operating expenses per gross ton mile rose 14% to 2.62 cents.

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Why it matters

The cash numbers are where the quarter helps a holder most. Free cash flow for the first nine months was C$2.92 billion, up C$577 million, or 25%, from C$2.34 billion a year earlier.

OptimistFi has argued that CN's value rests on its network turning freight demand into high-margin cash despite slow volume growth. The cash gain and the adjusted margin fit that view.

The source of the gain is narrower. Net cash provided by operating activities slipped to C$4.78 billion from C$4.82 billion. Net cash used in investing fell to C$1.86 billion from C$2.48 billion, and gross property additions fell to C$1.94 billion from C$2.43 billion. The gain came from lower investing outflows, not higher operating cash.

The nine-month figures show the same gap between sales and profit. Revenue rose 8% to C$13.9 billion. Operating income rose C$206 million, or 4%, to C$5.06 billion, and net income rose C$132 million, or 4%, to C$3.60 billion. Diluted EPS rose 7% to C$5.93.

Buybacks, dividend and debt

CN repurchased approximately 3.9 million shares for C$676 million in the third quarter, down from C$1.04 billion a year earlier. Repurchases for the first nine months were C$2.00 billion against C$1.45 billion.

The board approved a fourth-quarter dividend of C$0.9150 per share. That matches the third-quarter 2026 rate and is 3.1% above the C$0.8875 paid in the third quarter of 2025.

Leverage edged up. Adjusted debt-to-adjusted EBITDA was 2.61 times for the twelve months ended Sept. 30, against 2.54 times a year earlier. Adjusted EBITDA rose 5% to C$9.08 billion. The management's discussion and analysis also lists an amended unsecured credit facility of C$3.0 billion. Its tranches of C$1.75 billion and C$1.25 billion now mature on March 31, 2029 and March 31, 2031.

What's next

The fourth-quarter dividend is payable Dec. 30 to shareholders of record at the close of business on Dec. 9.

CN's fourth-quarter report will test its guidance. The company expects adjusted diluted EPS growth in the mid-to-high single-digit range and says it is tracking toward the upper end. Nine-month adjusted diluted EPS was C$6.03 against C$5.54 a year earlier. CN still assumes low single-digit RTM growth and plans to invest approximately C$2.8 billion in its capital program, net of amounts reimbursed by customers.

Grain is one driver to watch. Grain and fertilizers revenue rose 19% to C$923 million in the quarter, and CN now assumes the 2026-2027 grain crops in Canada and the U.S. will be above their five-year averages. The company also notes heightened demand risk from volatile macroeconomic conditions, geopolitical conflicts and global trade tensions. A reported operating ratio that stays above last year's would weigh on the case.

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