Canadian National Railway (TSX:CNR) is down about 7% over the past year. Contrarian investors are wondering if CNR stock is now oversold and a good buy for a Self-Directed Tax-Free Savings Account (TFSA) or Registered Retirement Savings Plan (RRSP) portfolio focused on total return.
Canadian National Railway stock price
CNR is trading near $136.50 at the time of writing. The stock has risen in a choppy pattern in recent weeks, but has been largely under pressure since early 2024, when it was trading around $180.
The results of trade negotiations between Canada and key trading partners, including the United States and China, will likely drive the story in 2026. CN operates nearly 20,000 route miles of rail lines connecting ports on Canada’s Atlantic and Pacific coasts to the Gulf Coast in the United States.
Lumber, metals, automobiles, coal, crude oil, crops, fertilizers and finished products all move along CN’s network, facilitating domestic economic activity and connecting buyers and sellers to international markets. Tariffs and ongoing negotiations with the United States forced CN to lower its 2025 expectations. The company initially expected adjusted diluted earnings per share (EPS) growth of 10% to 15% in 2025. Investors are waiting for the fourth quarter (Q4) report to find out how the year ended. Adjusted diluted earnings per share are expected to grow 5% to 9%.
That’s not bad considering the challenges the company faced during the year. CN has streamlined the business and maintained its $3.35 billion capital program to position the company for growth.
Risks
The window for Canada to reach sector-specific agreements with the United States to reduce tariffs on autos, metals and softwood lumber has largely closed. The discussions are now likely to be brought into the context of the broader Joint Review of the Canada-United States-Mexico Agreement (CUSMA) due to take place this year. There is a risk that negotiations will drag on for at least the first six months of 2026 before the July 1 deadline for a decision on extending the agreement. This will make it difficult for companies to plan investments or place non-essential orders. CN is likely to provide cautious guidance for the year given the ongoing uncertainty.
Another issue to keep an eye on is the planned merger of two major railroads. Union Pacific (UP) hopes to gain approval for its acquisition of Norfolk Southern (NS). The $85 billion deal would create the largest railroad in North America, with 31,000 miles of tracks connecting 43 states and 100 U.S. ports. This could result in CN losing customers due to reduced competition in the US market. In addition, freight flows could change as shippers move from Gulf Coast ports to U.S. East and West Coast ports connected to the proposed new company’s extensive network.
Possibility
At some point, a new trade deal will be struck between Canada and the United States. This will provide certainty to the business community and should stimulate demand for CN’s services.
The UP-NS merger may not be approved due to competition concerns. If it gets the green light, the impact on CN may not be as bad as some analysts predict. Economic growth could drive strong demand across the industry, even if dominated by fewer players.
Time to buy CN?
Volatility can be expected in the short term. That said, CN remains a very profitable company, and much of the uncertainty is likely already reflected in the share price. The board has increased the dividend annually for the past 29 years, and that trend should continue.
If you have a contrarian investing style and are willing to endure some volatility, CN probably deserves to be on your radar at this price level.
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