Canadian National Railway Q3 2026 Earnings Call Transcript

Canadian National Railway (NYSE:CNI) reported third-quarter financial results on Friday. The transcript from the company’s third-quarter earnings call has been provided below.

This transcript is brought to you by Benzinga APIs. For real-time access to our entire catalog, please visit https://www.benzinga.com/apis/ for a consultation.

View the webcast at https://edge.media-server.com/mmc/p/ommm9tgr/

Summary

Canadian National Railway reported an 18% increase in EPS on 4% volume growth for the third quarter of 2026, reaffirming guidance for mid- to high-single-digit EPS growth for the year.

The company highlighted its strong operational performance, including record third quarter fuel efficiency and improved productivity metrics, attributing these gains to the FastTrack initiative, which has realized $120 million year to date.

Strategically, the company is capitalizing on opportunities in energy and intermodal sectors, with significant growth expected from its new agreement with Union Pacific Railroad to extend reach into Mexico.

The company continues to exercise financial discipline, with a 25% increase in free cash flow year-to-date, enabling share repurchases and maintaining a strong balance sheet.

Management expressed optimism about long-term prospects, citing positive developments in Canadian industrial and resource projects and a conducive regulatory environment for growth.

Full Transcript

Krista (Operator)

Good morning. Thank you for your patience. Good morning. My name is Krista and I will be your operator today. All participants are now in a listen-only mode. After the speakers’ remarks, there will be a question-and-answer session, during which time we ask that you kindly limit yourself to one question. At this time I would like to turn the call over to Jamie Lockwood, CN’s Vice President of Investor Relations and Special Projects. Ladies and gentlemen, Mr. Lockwood.

Jamie Lockwood (Vice President of Investor Relations and Special Projects)

Thank you, Krista. Welcome, everyone. Thank you for joining CN’s third quarter 2026 financial and operating results conference call. Joining us on the call today are Tracy Robinson, our President and CEO; Pat Whitehead, our Chief Operations Officer; Janet Drysdale, our Chief Commercial Officer; and Jeffrey, our Chief Financial Officer. You can turn to page two of the presentation, which includes our forward-looking statements and non-GAAP definitions for your reference. These forward-looking statements reflect our current information and educated assumptions and include estimates, goals and expectations about the future. These involve risks and uncertainties and actual results may differ from what we expect. As a reminder, forward-looking statements are not guarantees, and factors such as economic conditions, competition, fuel prices and regulatory changes could impact actual outcomes.

It is now my pleasure to turn the call over to CN’s President and Chief Executive Officer, Tracy Robinson.

Tracy Robinson (President and Chief Executive Officer)

Thanks, everyone, for joining our call today. Now, before I turn to the quarter, I want to take a moment on the announcement that you will have seen come out yesterday. After nearly three decades at Canadian National Railway, Ghislain has decided to retire. He’s been a very close partner to me over the past five years and to our leadership team, and I know to many of you on this call as well. The financial discipline that he has built here is a large part of the CN that we are today.

Now, he’s not gone yet. Ghislain continues as CFO through February 1st, taking us through our full-year results, and after that will remain with CN as an advisor until his retirement at the end of March. Jamie Lockwood, who many of you know, will succeed as our Chief Financial Officer on February 1st. Jamie has been at CN for nearly 20 years. He’s worked across finance, strategy, supply chain and operations, and he’s been part of shaping our financial and our corporate strategy.

We’re excited about Jamie moving into the role, and for now I just want to thank Ghislain for his partnership over these last five years and to congratulate both of you as you move into your next role. Now onto the business. This was another solid quarter. We moved more freight while maintaining a fluid network and translated that volume growth into higher earnings and free cash flow. EPS were up 18% on 4% volume growth. Looking at the balance of the year, we are reaffirming our guidance for mid- to high-single-digit EPS growth based on low single-digit RTM growth. And as we sit here today, one month into the quarter, I can say we’re tracking more towards the upper end of that range.

We remain focused on running the railroad safely and efficiently, converting commercial opportunities, driving structural productivity and maintaining financial discipline. This focus is producing results. Let me highlight three key messages from the quarter. The first: the team continues to execute well. It all starts with safety. We delivered our best third quarter accident and injury performance in the last decade while handling more volume and maintaining reliable service across the network. We improved the productivity of our people and assets and delivered record third quarter fuel efficiency. These are structural gains which reflect changes to how we size and deploy our resources and run our network.

FastTrack has delivered about $120 million year to date, and that run rate carries into next year. These results demonstrate the strength of our team and our operating model, and the leverage inherent in our network. Given the capacity investments we’ve made over the last several years, we’re well positioned to accommodate additional volume while maintaining our current level of capital intensity. Secondly, our commercial strategy is delivering broad-based growth. Our teams remain focused on opportunities that fit our network and generate value for the railroad and our customers. The close alignment between operations and sales is driving results. Reliable service gives Janet and her team the confidence to pursue new business and price for the value of the service we deliver. The commercial team is moving with speed and agility to convert these opportunities.

Our boots-on-the-ground efforts have contributed approximately $300 million in new revenues so far this year. Thirdly, we continue to exercise financial discipline. Year to date, free cash flow has increased 25% driven by our strong commercial and operating performance and disciplined capital spending. This in turn has allowed greater flexibility with our balance sheet and we’ve continued to execute our share repurchase program to return cash to shareholders. The railroad’s operating well, service is reliable, productivity continues to improve and we have the capacity and resources in place to support our customers as opportunities develop.

Now, looking beyond the quarter, we remain excited about CN’s long-term prospects. About a year ago we updated you on some important changes being made at the company around investment, spending, productivity drivers and a continued commitment to driving shareholder value. We remain focused on what we control and over the past year we’ve developed enhanced capabilities and culture to drive execution as we plan for 2027 and beyond. We’re pushing further to ensure that we set the agenda for CN, and there’s a lot to be excited about.

The opportunity set ahead of us continues to expand. Positive final investment decisions for Phase Two of LNG Canada and Coastal GasLink reinforce the long-term outlook for Montney development, supporting additional frac sand and natural gas liquids volumes. Additionally, our soon-to-be-finalized agreement with the Union Pacific Railroad to extend CN’s reach into Mexico positions us to compete for a larger share of the approximately US$45 billion in annual Canada-to-Mexico trade, much of which is tied to Eastern Canada.

It creates an opportunity to market directly for additional cross-border traffic. Importantly, these opportunities are supported by a network with available capacity. We’ve completed much of the heavy investment required to support growth, and as additional business comes onto the railroad we can improve asset utilization, lower unit costs and generate higher earnings and free cash flow without a proportional increase in resources or capital. To be clear, capital intensity is normalized to a range in line with our North American peers, and additional volume on the network will continue to drive operating leverage.

In our model, the railroad is more productive than it was a year ago and the opportunity set in front of us is larger. We are delivering on our commitments and have a network that’s built to convert broad-based growth into earnings and free cash flow. With that, I’ll turn it to you, Pat.

Pat Whitehead (Chief Operations Officer)

Thank you, Tracy. The team delivered another solid quarter, safely moving more freight while maintaining a fluid, reliable network. I want to thank our entire team of professional railroaders across the system for their continued focus, discipline and commitment to our customers. As always, it starts with safety. Safety is the foundation of everything we do. We remain focused on reinforcing our operating discipline and ensuring that trains run safely and that every member of our team goes home safely at the end of the day.

I’m pleased to report that we have had the best third quarter accident and injury ratios in the last 10 years. This is encouraging progress, but we are never satisfied and we will continue to push to improve. Now turning to operations, we entered the quarter with a clear plan centered on network fluidity, service reliability and productivity. The team executed that plan and the results continue to demonstrate the strength of our team, our operating model and the capacity available across the network. We handled 4% more volume in the quarter while maintaining strong operating metrics. That combination is important. It shows that we absorb growth, protect service and make better use of our existing assets and resources.

Locomotive productivity improved 5% in the quarter. Employee productivity improved 7%. This is the seventh consecutive quarter with year-over-year improvement. These are not simply operating statistics. They translate directly into the cost structure by allowing us to move more freight without a proportional increase in locomotives or employees. Fuel efficiency is another area where the team continues to raise the bar. We achieved record third quarter fuel efficiency, including our best month ever in September, further reinforcing CN’s position as the industry leader. We are the most fuel-efficient railroad in the industry and we are setting new records every quarter. This performance reflects disciplined train handling and improved locomotive utilization, and the continued refinement of our operating practices.

Together, these efforts generated approximately $15 million in fuel savings during the quarter. Focusing on our western region, gross ton-miles increased 4% while car velocity improved 3%. We moved record volumes of grain while also moving more refined products, metals and NGLs, automotive, and improving service metrics. And we have capacity in place to do more. We currently have over 200 stored locomotives and we have available network capacity, including in the West. This gives us the ability to respond as additional business comes onto the network without adding resources at the same rate as volume.

As we grow into that capacity, we improve asset utilization, lower our unit costs and create operating leverage. FastTrack remains an important part of how we run this railroad. We have now realized approximately $120 million in benefits, up $20 million from last quarter. The work began with our major yards and terminals, but the mindset extends well beyond those locations. We continue to challenge how we use our facilities, vehicle fleet and other assets, and how we manage processes and purchased services across the operation. FastTrack is not a one-time initiative.

It is a continuous improvement discipline built into our scheduled operating model. We are pleased with the progress and we are not done. The takeaway from the quarter is straightforward. We remain committed to safety as the foundation upon which we built this organization. The network is running well. We handled more volume, maintained strong fluidity and service, and improved the productivity of our assets and workforce. We have the capacity and resources to accommodate additional growth efficiently, and the team remains focused on executing the plan and what is under our control.

Janet, over to you.

Janet Drysdale (Chief Commercial Officer)

Thank you, Pat, and good morning, everyone. I am extremely pleased with our performance in the third quarter, which highlights the growth opportunities enabled by Canadian National Railway’s unique network reach and the resiliency that comes from our diversified portfolio. Revenues were up 15% in Q3, revenue ton miles increased 4%. Same-store pricing continues to come in ahead of our rail cost inflation. However, in the quarter it was partly offset by mix and lower pricing on regulated grain.

Our boots-on-the-ground efforts, business development work, and our pipeline of sand-specific growth initiatives continued to produce. In Q3 we increased NGL exports through Prince Rupert, moved the first cars from the new Wolf Midstream fractionator, continued the ramp-up of phase two of our GTA fuel terminal, brought on additional canola crush capacity, shipped the first unit train from a newly expanded grain elevator in Illinois, and we celebrated the opening of the CAN export transload facility at Prince Rupert.

We are also continuing to leverage transload capabilities. We shipped the first cars into a new facility in New Brunswick, broke ground on a facility expansion in Nova Scotia, and increased transload capacity in Wisconsin. These are great examples of our BD efforts and boots on the ground now. Near term, energy continues to be a key growth driver. Over the medium and longer term, we expect growth between Mexico and Canada and between Canada and the world. Our agreement with UP provides CN with direct access to Mexico’s high-growth manufacturing corridor, complementing our existing access to central and southern Mexico via the CG Railway ferry. We are also very well positioned to benefit from increasing investment in Canadian industrial and resource projects, including the recently announced $2 billion of federal and provincial level investment to develop Ontario’s critical minerals in the vast Ring of Fire.

The progress we are seeing across the portfolio gives us confidence in our ability to continue to create value for many years to come. Now let me walk you through the key Q3 highlights. Grain and fertilizer RTMs were up 12%, supported by record crop production and robust export demand. Petroleum and chemicals RTMs were up 5%, driven by continued growth in shipments of refined products, mainly gasoline and diesel, as well as increased crude shipments to the Gulf Coast. In metals and minerals, growth was driven by strong long-haul steel movements within Canada, as well as higher scrap iron and aluminum shipments. Frac sand reflected a mixed change as growth in shipments to northeast B.C. and within the U.S. replaced volumes destined for Alberta.

The positive automotive results reflect continued share gains and a shift towards longer-haul import traffic. Coal RTMs declined in the quarter due to production challenges impacting West Coast volumes, and forest products volumes were impacted by ongoing market challenges. In intermodal, domestic volumes were impacted by wildfire-related disruptions, while overseas performance reflected the demarketing of certain shipments and weather-related disruptions in Asia affecting customer supply chains.

Moving now to Slide 9 and turning to the fourth quarter, petroleum and chemicals is expected to benefit from new crude business, including the expansion of Strathcona’s MIOTA facility, fractionator expansions by Pembina and Wolf, and continued growth in NGLs and refined products. In coal, we expect steady demand for U.S. exports. Canadian coal shipments will depend on mine-level production as well as operational conditions, including at Prince Rupert.

A labor disruption at the terminal continues to impact volume throughput. In metals and minerals, demand for steel and aluminum remains constructive through the remainder of the year, as does demand for frac sand in northeast B.C. In grain and fertilizers, growth is expected to moderate as we lap last year’s record performance. There’s no change to our forest products outlook. Turning to intermodal, we expect domestic performance to strengthen in Q4, supported by recent commercial gains and additional opportunities for truck-to-rail conversion. In overseas, we expect volumes to be weaker than prior year levels, but we’re encouraged by CMA CGM’s Indomex service expansion to Halifax. The first vessel, expected to arrive late November, enhances coverage between Canada and the Mediterranean and India. In automotive, we expect the trend towards higher offshore imports to continue.

So let me wrap up. Our third quarter results demonstrate both the strength of our franchise today and the opportunity that lies ahead. Our foundation is solid, we have a great franchise, available capacity, and we’re delivering operational and service excellence. We are built for growth with multi-year, multi-commodity growth prospects across our network, a new connection to Mexico, and increasing investment in Canadian industrial and resource projects.

I remain confident in, and very proud of, the commercial team’s commitment to find new opportunities, capture the volumes that best fit our network, and maintain our pricing discipline. Ghislain, over to you.

Ghislain Houle (Chief Financial Officer)

Third quarter reported diluted EPS was $2, up 9% from last year, which included a one-time expense of $118 million in asset impairments and $14 million in advisor fees related to industry consolidation. The impairment is a non-cash charge and is related to the discontinued development of portions of certain technology projects before completion. It does not change our commitment to using technology where it improves safety, customer service, productivity, or the efficiency of the railroad.

Therefore, adjusted diluted EPS was $2.16, up 18% from last year, or $2.14, 17% higher on an exchange-adjusted basis. This strong performance was driven by solid volume growth, continued pricing discipline, and the productivity improvement that Pat talked about. We delivered an adjusted operating ratio of 61%, a 40 basis point improvement. The quarter was impacted by higher year-over-year fuel prices, which had a dilutive impact on operating ratio of 60 basis points.

Excluding the impact of fuel, our adjusted OR would have been 60.4%. This demonstrates the value of the productivity initiatives across the business and our ability to generate operating leverage as volumes grow. Free cash flow for the first nine months was $2.9 billion, an increase of 25% compared with the same period last year. The improvement reflects disciplined capital expenditures partially offset by higher cash tax payments. Free cash flow conversion is now 80% year to date at the end of Q3. During the quarter we repurchased close to 4 million shares for approximately $675 million. Our adjusted debt to adjusted EBITDA ratio was about 2.6 times at the end of the quarter, and with strong operating performance for this year, we now expect the leverage ratio to come back to around 2.5x by the end of the year instead of in 2027.

We will continue repurchasing shares through the end of the current program, consistent with our capital allocation framework. Turning to slide 12, let me review the quarter’s key operating expense categories. Adjusted for foreign exchange, labor increased by 6% driven by general wage increases and an approximately $35 million increase in incentive compensation versus last year, which were partially offset by 3% lower average headcount and strong labor productivity. Purchase services and material was up 11% driven by higher trucking and vessel costs, mostly due to stronger volumes, and higher material and advisory costs.

Reduced capital credits from our lower capital program had an approximately $15 million impact on operating expenses, mainly affecting purchase services and material and labor expenses. Fuel expense was about $235 million higher on a year over year due to higher fuel prices, with the impact of higher volumes offset by record fuel efficiency. Fuel prices had a positive impact of $0.14 on EPS in the quarter. However, as noted, it had a 60 basis point dilutive impact on operating ratio.

For Q4, if fuel prices remain at current spot rates, we expect an EPS tailwind of approximately $0.10 with a 100 to 150 basis point headwind to the operating ratio. Other expenses were largely flat year over year. Moving to slide 13, let me provide some visibility for the balance of the year. Supported by our third quarter performance, we are reaffirming our guidance for mid- to high-single-digit growth in adjusted diluted EPS based on the low single digit RTM growth, and we’re currently tracking more towards the upper end of that range. As a reminder, we will be lapping stronger year-over-year comparisons in the fourth quarter, which is reflected in our outlook.

We also continue to expect approximately $2.8 billion of capital investment in 2026, net of customer reimbursements. We entered the fourth quarter in a solid position. The railroad is operating well. Service remains strong. We are staying closely connected to our customers, and we have capacity available across the network. We will continue to match resources to demand and maintain our focus on productivity, pricing discipline, and cost control. To summarize, Q3 was another solid quarter. We continue to demonstrate the operating leverage and cash generation potential of the business when we combine profitable growth with strong execution and financial discipline. With that, I will turn it back to Tracy.

Tracy Robinson (President and Chief Executive Officer)

Thanks. So as you heard today, this was another strong quarter and a clear demonstration of what the team can deliver. So, operator, over to you. We’re ready to take questions.

Krista (Operator)

Thank you. We will now begin the question and answer session. As previously mentioned, we ask that you kindly limit yourself to one question. The first question comes from the line of Brian Ossenbeck with JP Morgan. Please go ahead.

Brian Ossenbeck (Analyst at JP Morgan)

Hey, good morning. Thanks for taking the question, and just Lane, it’s been a pleasure working with you. Congrats on the retirement, and Jamie, congrats on your promotion as well. Maybe just a couple quick things to start. It’s great to hear the update on the Fast Track from Pat. Maybe a little bit more details if that’s $120 million run rate so far, or if it’s actually realized net, or if that’s a gross number. So a little bit more clarity on that.

And then just from a competitive dynamic, we saw the headlines of the Elk Valley Coal Agreement, so just wanted to hear how that would affect the rest of the year, if anything, and if there’s any sort of operational changes that you need to make on that front when it starts to transition. Thanks very much.

Pat Whitehead (Chief Operations Officer)

Okay, and I’ll start with the Fast Track, and that is $120 million realized. And to be clear, we want to make sure this is clear: Fast Track is not a one-time initiative. This is how we run the place, and it’s about bringing the discipline and the urgency to execution. This is about challenging how we work and making continuous improvement in the day-to-day operations. So we’re excited about this. We’re excited about what we’ve accomplished in 2026 and how we take that momentum into 2027.

Janet, over to you.

Tracy Robinson (President and Chief Executive Officer)

Thanks, Pat. And thanks, Brian, for the question. I think the topic was discussed earlier this week, but I do appreciate the opportunity to take a minute and share my perspective. And so under the existing contract, EVR’s traffic to Neptune moves on CPKC from the mines in southern B.C. to the Kamloops interchange, at which point CN will then take the train and move it into the terminal. Starting on January 1, about half of the volumes will continue in that manner.

The other half of the volumes will move, I would say, a little bit further down the rail line before interchanging with CN, and we will again complete the delivery of the train into the terminals. So one handoff under the current operating model and one handoff under the future operating model. I will quantify it for all of you. The impact of this is about $0.03 of EPS to us in 2027. But I want to assure you that the commercial team is laser focused on backfilling the contribution dollars with other opportunities, and I have full confidence in the team we’re going to tackle that challenge head-on in the same way that we’ve overcome the $350 million of tariff headwinds from last year. More broadly, we’re going to continue to focus on selling the value of our service and pricing ahead of our rail cost inflation. Thanks, Brian.

Krista (Operator)

Your next question comes from the line of Saadi Chauman with BMO Capital Markets. Please go ahead.

Saadi Chauman (Analyst at BMO Capital Markets)

Thank you. Good morning, Ghislain and Jamie. Congrats both on the retirement and promotion. Ghislain, thank you for all the good conversation over the years. I appreciated that.

Ghislain Houle (Chief Financial Officer)

Thanks. It’s appreciated.

Saadi Chauman (Analyst at BMO Capital Markets)

Janet, maybe kind of following up on the volume question, I guess, and the core question. Like, you know, your RTMs are probably tracking year to date if I exclude grain and for category somewhere in that 1% range. But it seems from your commentary you highlighted a lot of kind of opportunities on the energy side and maybe metals and sand, and I just wanted to kind of get your perspective, like, as we go into 27 does this kind of non-grain business accelerate?

What are the kind of the key driver of what you see potentially accelerating your growth there? Right. I know grain will have a bit of a tough comp. Maybe there’s an opportunity on potash later in the year, but just trying to get some perspective on that non-grain business and some of these opportunities that you’re talking about as we go to 27, if we see an acceleration from the level you’re at today or not. Thanks.

Janet Drysdale (Chief Commercial Officer)

So that’s a creative way, Saadi, of trying to get me into the detail. I’ll give you a little bit of high level on that one. We’ve been talking a lot about energy. I hope folks have been listening. This is a great multi-commodity, multi-year opportunity for us. And so when we look ahead to 27, we see continued strength in the refined products into our GTA fuel terminal. We see growth of NGLs going into Prince Rupert, and that’s backed up by new fractionation capacity with Pembina and Wolf coming online.

We have incremental crude business that’s coming online. We see strength in plastics. So that overall kind of energy franchise under our petroleum and chemicals banner, we see a lot of good growth. We see continued growth in automotive. We have two plants that had been down for retooling, one in Canada, one in the U.S., and those are coming back online. So one of them has started up already. The other one is more kind of end of March timeline, but that’s going to support continued growth in automotive. I think at this point Forest Products has kind of lapped the worst of its issues. So, while we don’t see growth there, we don’t see significant risk either.

We’re excited about the BHP facility coming online in the second half of the year, and we think our boots-on-the-ground effort, that every-one-carload-counts, carloads that we can service well on our network, that has been producing pretty close to $100 million a quarter, as Tracy referred to. And so we’re going to keep the team focused on growing. And of course we also have this new Mexican opportunity, and maybe it’s worth I take a minute or two more on that one. We’re pretty excited about it. Tracy kind of gave you a high-level sense of kind of the trade between Canada and Mexico. Over $45 million U.S. in trade that moves between those two countries, and the majority of that is actually moving towards eastern Canada. So we think we’re really well positioned there. I would think about that opportunity maybe in three buckets.

There’s an immediate opportunity to extend our length of haul with the new Memphis Gateway, and so we capture incremental revenue on those movements. Second, we see an opportunity to compete for rail traffic already moving, and we’re confident in our ability to offer customers a compelling service. And third, there’s a longer-term opportunity there to convert truck to rail. And I think as you all know, there’s a pretty substantial truck market between Mexico and Canada.

And we believe our network together with Ferromex gives us a really great platform to pursue this business. So what I really love about this deal is it allows us to extend our reach by leveraging our existing network while partnering with a really strong Mexican rail operator. So we have the network, we’ve got the customer relationships, and we’re excited to drive that growth. Hopefully that gives you a bit of context for next year. Appreciate the question.

Krista (Operator)

Your next question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead.

Ravi Shankar (Analyst at Morgan Stanley)

Great, thanks. Good morning, everyone. And Jamie, congratulations as well. Tracy, big picture question for you. It’s been a year since your reset of sorts on the guidance and the communication. You said at the top of your remarks that the focus is producing results, the machine’s working well. You have your team in place. What’s the next leg of the story here beyond just waiting for the upcycle? And have you considered maybe having an Investor Day in 2027 or something to tell us what the next several years look like?

Thank you.

Tracy Robinson (President and Chief Executive Officer)

Hey, Ravi, good morning. Yeah, we’ve gone through, as we’ve discussed before, there was an early evolution where it was obvious that we needed to make some investments in the network and in our locomotive fleet and to get us where we needed to go. And so we went through that. To your point, we got to a point last year, middle of the year, where we brought that down to a more, you know, what we would call a more industry level or sustainable level.

But it gave us the capacity that we need, largely in the West, and locomotive fleet for Pat to respond to the opportunities that Janet is creating. Since then, the focus has been to lean in on quarter over quarter more efficiently running the operation. As Pat has leaned into that, we’ve kind of named it Fast Track, but as he said, it’s just the way that we’re going to operate this business and you’re going to see more of that, and we are now, you know, executing that well, and you’re seeing the results from the execution of that.

We also, as we put Janet on this job about now. How long ago, Janet? A

Janet Drysdale (Chief Commercial Officer)

year and a bit.

Tracy Robinson (President and Chief Executive Officer)

It was a renewed focus, boots on the ground, get in front of our customers. It was at a time when, you know, it was a pretty volatile environment, especially on the Canadian side with the impact of tariffs. She was very successful through that process and not only, you know, providing solutions for our customers, but also in replacing that $350 million of tariff impact. We’ve largely cycled through that. So we’ve got now the network that we need, we’ve got the extension into Mexico we’re finalizing, we’ve got the capacity that we need, and we’re continuing to invest in bits and pieces on that.

So, yeah, we’re turning our attention to growth. And as a railroad, without a doubt, we rise and fall a little bit on the strength of the economy and we’ll operate in whatever economy kind of presents itself. But we have some kind of unique asymmetric growth opportunities. Janet took you through them. We have the benefit of being the railroad of the North up in the energy sector and the benefit of having new access to Mexico. But we also are the beneficiary of a renewed Canadian administration focus on getting natural resources and other kind of industries ramped up.

So the Carney administration has leaned into creating a more positive environment for investment, whether it be the tax changes that they’ve made, whether it be the permitting changes they announced a couple of months ago on the one project, one permit, one year, and some of the regulatory changes that they’re making. So this is a very constructive environment and it’s focused on getting Canada’s natural resources, which are in high demand, to markets across the continent and around the world.

And CN is uniquely positioned for that, both with our connections into North America and our partnerships with the other railroads, as well as with a pretty unparalleled port access into global markets on both the western and the eastern sides of the country. So we see as we look forward, it will take some time for some of this to manifest. Janet took you through some of the near-term things we see in 2027, but she’s also involved in a tremendous number of dialogues with industry around other plants as this environment gets better and better. So we do think we’ll ride and fall with the economy. We’re really well positioned to do that. We’ve been delivering the productivity that it takes to handle the ups and downs in that and the commercial flexibility.

But we’ll also be looking to capitalize on those unique opportunities that this network and this time presents us. We are thinking through when we do the next Investor Day. I think we’re thinking through whether it’ll be next year or shortly after. We’ll want a couple things to settle, maybe a little more clarity on the final stages of the tariff kind of environment that we may be in and the impact of that. And we’ll see where the merger kind of discussion settles out, but it won’t be too long, Ravi.

Krista (Operator)

Your next question comes from the line of Sherrilyn Radbourn with TD Cowen. Go ahead.

Sherrilyn Radbourn (Analyst at TD Cowen)

Thanks very much and good morning. And I also wanted to start just by extending congratulations to Ghislain and Jamie. My question is whether you could give us some perspective on your sense of the state of U.S.-Canada trade negotiations, talk about some of the shifting trade patterns you’ve seen as a result of the tariff regime, and whether you think some of those would stick even once we get a resolution. Thank you.

Tracy Robinson (President and Chief Executive Officer)

Thanks, Sherrilyn. Listen, it’s been a journey, hasn’t it? And I don’t think that journey’s over. We saw a very, very kind of volatile year last year with the tariffs, big tariff announcements. I think we’ve all managed that particularly well. This is a sectoral story. So, you know, I think 85% of the goods — I think that’s the case, maybe it’s fallen a little bit — of the goods between Canada and the US travel across the border with no tariff. But there are sectors that are disproportionately and uniquely impacted. And Jan has been working with our steel customers, with their automotive customers, with their forest products customers. And there are some adjustments that have been made there around the kinds of markets that they’re shipping into.

The question is, if we get a resolution, how much of that continues? Or do we revert back to the US — we’ll be nimble in working with our customers on that as well. It appears that there are some dialogues going on again after, you know, there was a near miss in August on a USMCA extension or a deal. So we’ll see where that takes us. But without a doubt, this has driven two things: a level in kind of resilience and nimbleness in our company and how we manage through the volatility that things like this bring us.

And secondly, and I just mentioned, a renewed focus in Canada to create the conditions under which industry and natural resources growth takes place. And we are very supportive of that, as I said, and I think uniquely positioned to both help that and benefit from it.

Krista (Operator)

Your next question comes from the line of Ken Hexter with Bank of America. Please go ahead.

Ken Hexter (Analyst at Bank of America)

Hey, great. Good morning and I’ll echo it. Congrats, Ghislaine, on your retirement. Been a great decade working with you. Appreciate all the help and discussions over time. And Jamie, certainly congrats on the new role. Been a great start working with you in your prior role. So looking forward to it. Janet, I guess I’ll jump over to Intermodal. Right. This is the Rails and CN cyclical opportunity to take share. But you mentioned international demarketing lanes, congestion in Asia, the impact of Rupert’s labor disruption.

Yet the West Coast US Ports are posting some of the best levels ever. And domestic, you noted some wildfires. Maybe talk a bit about the opportunity for a rebound. Talk about the win back and backfill and the timeframe for that and then just a side note, Tracy, I don’t know if you want to mention what tech projects were canceled that was such a large charge.

Janet Drysdale (Chief Commercial Officer)

Okay, Ken, I’ll try and take it kind of one at a time there. Just for clarification, the Prince Rupert labor disruption is related to a coal terminal. So that has — there’s no issue there currently in terms of the container side. The wildfires did disrupt us a little bit and that impacted main domestic, but it also impacted a little bit on the overseas side. We’re past that now. Pat and his team, frankly, did a phenomenal job kind of delivering the service recovery on that.

And prior to that we had a really solid run-rate performance on domestic growth. And I fully expect that to continue. And so it’s not quite as robust, I would say, the kind of truck market in Canada as it is in the US. So we haven’t had as much of the capacity reductions on the Canadian side and that’s where we’re more exposed on the domestic side. But certainly the service that Pat and his team are providing is enabling us to get more of that truck-to-rail conversion, to get more market share wins.

And that is something we see continuing in the fourth quarter and certainly into next year. On the international side, I guess I would say we’re going to sell to the value of our service first and foremost. We have some opportunities that we’re chasing down there across a number of the port terminals. We believe in the value of Prince hard works about the incremental value that we have at Prince Rupert. With the can export facility opening, we went up there and celebrated that opening in August, and Intermodex is actually coming on and that brings new capability for import transloading and that’s going to support, I think, more stickiness with the customers.

So stay tuned on that one. But we’re optimistic about intermodal over the nearer term, maybe just not in the first half of next year. Hope that gives you a bit more color.

Tracy Robinson (President and Chief Executive Officer)

Ken, on the IT systems. Let me just take your second question there. Listen, I gotta tell you that I and this team find this completely unacceptable that we would find ourselves in a position where we’re taking this action. But it was a necessary one. There were a couple of systems that, between us and the vendors that we had chosen, we had some failures. One was the dispatch system with PDS, and that was just, you know, so we’ve regrouped on that.

We’re being careful about our vendor selection as we go forward and I’ll talk a little bit more about the governance on this as we go forward. The second was a reorientation of our SAP S/4HANA as it hit a couple of the operating areas. We had originally undertaken a greenfield approach. We’ve reverted back to a brownfield approach. We think that that’s appropriate, which meant a small portion of that work needed to be set aside. So this is — you know, we take our capital, our capital execution very, very seriously in this organization. And this has caused us to relook at our governance right up to me in the ELT level, to reconsider our vendor selection and how we manage vendors and our internal processes as we refocus on these areas.

You know, you’ll see different outcomes as we go forward. I’ll leave it at that. Jiz, unless you want to add anything.

Ghislain Houle (Chief Financial Officer)

No, I think you covered very well.

Krista (Operator)

Your next question comes from the line of Walter Sprecklin with RBC Capital Markets. Please go ahead.

Walter Sprecklin (Analyst at RBC Capital Markets)

Yeah, thanks very much, operator. And again, yeah, congrats to Jamie and Ghislain on your retirement, Ghislaine, and your promotion. Jamie, that’s great. Question for Janet here. I have been speaking to your customers in the last few weeks, quite a few of your customers. I know you love that, Janet. So my question, though, is on the potential headwind you might see next year from the success you had this year, and I get, you know, call it market share normalization.

A bunch of your customers would tell me that 26, you had opened up a lot of good capacity and that allowed you to take volume that CP either ceded to you or diverted to you. So my question is for how much of that gain in 2016 do you see as sticky and will not revert back, or conversely, how much of that is at risk of going back to CP and therefore a headwind in 27.

Janet Drysdale (Chief Commercial Officer)

So I’m going to give you a short answer, Walter, to a bit of a long question. We have gained business this year because we have provided a great service. And I’m looking at Pat across the table here, and I feel very confident that he’s going to continue to provide our customers a great service into next year. And that’s the short answer. Thank you.

Krista (Operator)

Your next question comes from the line of David Vernon with Bernstein. Please go ahead.

David Vernon (Analyst at Bernstein)

Hey, good morning. And I’ll echo the congratulations to the team. So Tracy, the bill C39 seems like it’s a bit of a mixed bag. For real. There’s some good stuff in there around labor and investment. There’s some potential headwinds in there around interswitching. Can you tell us kind of what you’re thinking about in the bill and what could move and more importantly, maybe frame, if it were to go forward with interswitching, what kind of headwind that might be for 2027?

Tracy Robinson (President and Chief Executive Officer)

Thanks, David. Yeah, you’re paying attention to Canadian legislation. That’s fantastic. Bill C39 was introduced and it is working its way through government and they intend to bring it into law by the end of the year is the current target. And it contains, as you say, quite a number of provisions. One of them is permitting around permitting. So this is the one permit, one approval, one year, which is a dramatic improvement in the kind of industrial policy in Canada and has caught the attention of many of our resource customers and industries across the country.

And I think you’re going to see an uptick in behavior coming out of that and confidence. And, you know, it will feed some of what Prime Minister Carney’s aspirations and targets on around investment and around getting the economy going. So that I think is very, very positive. It does also have a strong labor focus. And I think it kind of characterizes what we all believe, which is collective bargaining is one of our core values. And it’s critical to the way that we think about our relationships with labor. We support that strongly. It also recognizes the critical importance of labor in supporting the economic strength and growth and the reliability of Canada’s supply chains. And so we think that the discussions going on on that are particularly important.

And I think you had a third one, David, that you wanted me to comment on. Was there a third piece in there? So if not, generally — oh, the interswitching. Thank you. Yeah, the interswitching is just an extension of what the government has put in place before on an extended interswitching. You know, we’re not keen on this one, but I would tell you that we had two pilots on it so far and we haven’t had any business move any differently because of it.

So we disagree with the principle of it, of course, but it has not had a real impact on the volumes, nor do I expect it to have an impact on the volumes going forward. If you service your customers well, then these kinds of provisions are not really impactful.

Krista (Operator)

Your next question comes from the line of Konark Gupta with Scotiabank. Please go ahead.

Konark Gupta (Analyst at Scotiabank)

Thanks, operator. Good morning. Echo wishes to both Jis and Jamie. And Jis, thanks for years of support you provided to us. Jamie, welcome to the new roles. First question on capacity. I mean, Tracy, Pat, the team, you guys mentioned about how much capacity you have built over the years and you are now looking to invest a lot more. I’m just wondering how much growth can you bring to the current network before evaluating more investment opportunities down the road.

Tracy Robinson (President and Chief Executive Officer)

Let me answer that one at a high level and I’m going to give it to Pat who can get into the details. We look at, on the forward-looking view, we look at the volume growth that we think we can generate here and then we size our capacity and our resources to be able to accommodate that growth. The effort that we undertook a few years was largely focused on A, the locomotive fleet — reliability of the locomotive fleet to do what we needed to do — and B, on the expansion of the Western corridor.

So we lifted the capacity of the Western Corridor by, in effect, 25% and have got two-thirds of the Edson Sub double tracked, which is, we believe, no-regret capital given the growth that’s going on in the western part of the network. As to when we hit the next capacity limits, it’s going to depend on what growth and where it comes on in the network. But I would look forward to the time when we’re starting to hit up against some of the capacity that Pat has put in place. Pat, do you want to make any comments on that?

Pat Whitehead (Chief Operations Officer)

Yeah, I would say that we’ve talked about it many times. The east and the south have plenty of capacity. We are, we’re looking to Janet to help us fill that up. We’re excited to fill that capacity. I would say this about our Western Corridor. We’ve been asked the question before, is there enough capacity in the west? It’s a historic pinch point. If you go back to 2017, 2018, the crude boom, I would say this, our investment strategy of focusing on the Western Corridor, Edmonton sub, specifically west of Edmonton to Tracy’s point, we built 25% capacity and the story is proving itself.

We moved record grain in the Western Corridor with improved service metrics, both speed, velocity. We have fewer locomotives, we have over 220 locomotives stored. We still have employees furloughed. So we are handling more volume in the Western Corridor with more capacity to grow and we are moving faster than we have in the past. So I think the investment strategy has proved itself and is paying dividends.

Tracy Robinson (President and Chief Executive Officer)

And let me just add one thing. I don’t want to lead you to believe we’re not investing anymore within our current capital framework. We’re still investing. Pat has work underway outside Vancouver, up at Rupert, and so it’s just we’ve come out of the big investment cycle. As we look forward, we believe that our growth is manageable within a more industry normalized level of capital. Thanks, Konark.

Krista (Operator)

Your next question comes from the line of Brandon Oglensky with Barclays. Please go ahead.

Brandon Oglensky (Analyst at Barclays)

Hey, good morning and congrats to Jamie and Ghislaine as well. And Ghislaine, enjoy some time on the golf course. And maybe I’ll just follow up on the capital question there. Pat, you did say fast track. You have more to come on incremental efficiencies. How contingent is that on getting volume growth within the network? Especially as Janet is telling you, we need incremental service to keep winning incremental share.

Pat Whitehead (Chief Operations Officer)

I would say this. We’re going to challenge everything that we do. My job is to make sure that we’re right-sizing resources to volume. So regardless of that volume, volume is our North Star and we will continue to be more productive. We are seven quarters in a row with year-over-year productivity improvement. Our cost per GTM this year is down 3%. Look, it’s my job and this operations team’s job to wring out cost and waste and we’re going to continue to focus on productivity and right-size all of our resources to the volume that presents itself.

Tracy Robinson (President and Chief Executive Officer)

And it’s my job to make sure he’s well challenged in that regard.

Krista (Operator)

Your next question comes from the line of Chris Weatherby with Wells Fargo. Please go ahead.

Chris Weatherby (Analyst at Wells Fargo)

Yeah, hey, thanks. Good morning guys, and congrats Ghislaine and Jamie. I guess I want to see, maybe we could pull it all together. There’s some really optimistic stuff happening on the revenue side, which is exciting, and it sounds like you got a lot of productivity kind of building here. Comps are going to be a little bit challenging, I think, and obviously there’s fuel that you need to sort of see how it works out. But I guess when we pull this together, thinking either 27 or bigger picture beyond that, does it sort of seem like the setup to return to double-digit EPS growth is kind of on the horizon here?

Just want to get a sense. Obviously the last couple of quarters have been very good and in line with that, want to get a sense of how sustainable you think this is as we look out to 27 or maybe sort of bigger picture?

Tracy Robinson (President and Chief Executive Officer)

Listen, what we’ve been focusing on is getting really good at the things that we control and I think we’ve got a lot of great building blocks in place for that. We took care of the capacity constraints that we had; we’re continuing to work away on that. We’ve got a new kind of focused boots-on-the-ground approach to the marketplace that has us in a position to be nimble and to provide solutions to our customers in any economic. And Pat, as he said, has leaned in pretty heavily on the product side, getting more out of our resources every quarter and every day.

And we’re focused on executing and that has, as you say, been translating into results. And that productivity creates room for us to grow. It creates operating leverage in the business and it creates a growing free cash profile and we’re very happy with that momentum as we look forward. None of that changes. It’s all going to continue. We have some headwinds as we look into 2027 from a growth perspective, just lapping the bankrupt. We had a record grain movement through almost all of the last grain cycle. But you know, those are the things that come and go and change.

We can’t control that. What we can control is where we have those idiosyncratic growth opportunities and leveraging our network to go get them. I think we’ve done a good deal process of closing with the UP on Mexico. That does two things. It mitigates the risk of the merger to our network and our business, but it also creates opportunities. We’ve got a unique opportunity in the natural resource space up here in the north and so we’ll be looking to leverage those.

So if you look through cycles, what we’re looking to do is to build resilience in our business such that we can produce in any economic cycle the kinds of results that you and we would expect and the high single-digit, low double-digit kind of EPS growth. Over time we’re getting better and better at reacting to what’s happening around us and we’re getting really disciplined about pulling the levers internally on what we can control. So we’re very optimistic about the future.

Lots going on out there. It’s still a volatile environment, but we’re focused and we’re going to stay disciplined.

Krista (Operator)

Your next question comes from the line of Benoit Poirier with Desjardins. Please go ahead.

Benoit Poirier (Analyst at Desjardins)

Yes, good morning everyone and congratulations, Ghislain and Jamie, for your new roles. Yeah, just looking on energy. Janet, you mentioned quite a lot of great opportunities going forward with respect to LNG, frac sand, even some potential crude-by-rail opportunities longer term. Just wondering whether petroleum and chemicals RTM growth could be—and could we see a double-digit volume growth for 2027? And maybe Tracy, if you could share an update on the discussion with the TCRC as the labor agreement is maturing in December 2026, if you could talk about some potential outcomes or mitigation factors you might consider, that would be great.

Thank you.

Janet Drysdale (Chief Commercial Officer)

Thanks, Benoit, for the question. I love the pointedness of it and the desire to extract a little more detailed information. I think we’ve talked a lot about energy. It’s a multi-year, multi-commodity opportunity. I think we’re going to see the kind of steady pace of growth. What’s exciting to me is more kind of a ratable steady growth through this year through 27. You know, when we get into mid-2028, we’ve got the ACE terminal coming online. When we get into late 2029, we have the down path to zero project coming online.

So I’m pretty happy with the way I see that growth coming on, our ability to handle the growth. And I love that it’s kind of a range of commodities under the big energy umbrella. So it doesn’t quite get to your specific answer, but that’s all I’m going to say at this point. Tracy, I’ll pass it back to you.

Tracy Robinson (President and Chief Executive Officer)

Benoit, on the labor front, listen, we believe in the process of collective bargaining and we think it’s an important process with our employees. It’s important for our company, obviously important for our customers and for Canada when it comes to the TCRC. So we’re very focused on what we’d like to do, and that is to get a very constructive, productive agreement at the table. As you noted, this collective agreement that we’re under now expires at the end of the year.

We are engaged with the TCRC now and we have discussions underway. Obviously our focus is on getting a deal across the line, so I’ll leave it at that for now. But it is one of our key priorities.

Krista (Operator)

We have time for one more question and that question comes from the line of Kevin Chiang with CIBC. Please go ahead.

Kevin Chiang (Analyst at CIBC)

Hi, thanks for fitting me in here. And again, congrats to Ghislaine and Jamie. Maybe Jan, just to clarify. So it sounds like it’s the Trigon terminal you’re referencing in terms of some of the, I guess, the coal headwinds out in Prince Rupert. It seems like there’s some concern this could impact propane volumes as well, just given, I guess, what AltaGas said this week. Just wondering how that might impact your near-term PNC outlook as you close out 2026.

Janet Drysdale (Chief Commercial Officer)

Yeah. So maybe it’s worth taking a minute to go a little higher level on this one. And let me start by saying that the federal government has been very seized with this issue, I think fully recognizing the broader issue of labor stability is really a fundamental tenet of Canada’s ambitions around trade growth and trade diversification. So their support is really important in how this plays out. To your point, from a CN p