4. Canadian National Railway Company (NYSE:CNI)
Stake Value as of Q4 2024: $5,565,467,047
A leading North American transportation and logistics company, Canadian National Railway Company (NYSE:CNI) transports more than C$250 billion worth of goods annually for a wide range of business sectors, ranging from resource products to manufactured products to consumer goods, across a rail network of approximately 20,000 route-miles spanning Canada and mid-America.
Canadian National Railway Company (NYSE:CNI) had a difficult Q4 2024, facing a number of challenges including labor issues and strikes. The looming threat of tariffs by the Trump administration could also seriously hamper its operations. The company reported a Q4 2024 revenue of around $3 billion, down 9.38% YoY and below market expectations by over $24.2 million. However, CNI’s overall 2024 revenue still surged by around 1.3% YoY to a little over CAD $17.04 billion (approx. $11.96 billion). CNI also generated $3.1 billion in free cash flow in 2024, down $800 million from the year before due to higher capital spending and lower cash flow from operations. Reiterating its commitment to its shareholders, the company recently announced a 5% dividend increase for 2025, marking 29 consecutive years of growth. It also authorized a new buyback program for up to 20 million shares from February 2025 to February 2026.
It was announced last month that Canadian National Railway Company (NYSE:CNI) has gained regulators’ approval to acquire Iowa Northern Railway Company. The merger will further bolster CNI’s network, adding 175 route miles within the state of Iowa, and will offer single-line service to better connect grain, fertilizer, renewable fuels, and industrial markets to CNI’s North American network.
Appalaches Capital stated the following regarding Canadian National Railway Company (NYSE:CNI) in its Q3 2024 investor letter:
“During the quarter, we established core positions in two railroads: Canadian National Railway Company (NYSE:CNI) and CSX Corporation (CSX). The investment thesis is simple. Domestic railroads have not seen volume growth over the last 20 years despite being the cheapest, cleanest, and safest form of freight transportation. The lack of volume growth and related share losses to trucking is due to the poor reliability of the networks. However, there is strong evidence to believe that this may not be the case going forward. It seems that investors are overweighting historical characteristics of the industry and not giving credit to recent and sustainable improvements in service metrics. If the rails are able to show any sign of sustained volume growth, our investment should perform very well.
The Canadian railroads have more or less operated at full capacity over the last two decades, while the U.S. networks have not. Why is that? There are a few reasons for the anemic volume growth domestically, but only one of which is not shared by the Canadian railroads: service. In 2017, had you shipped goods by rail in Canada, the odds that your shipment would arrive on time, or the ‘trip plan compliance’ rate, was around 90% or higher. In the U.S., these levels were closer to 50%.5 Maybe you have a different opinion, but I am not particularly excited about using a shipping service that only has a coin flip’s chance of arriving on time, even if it may be more economical…” (Click here to read the full text)
