Volume Growth and Margin Gains Won't Be Simple for Canadian National in 2023

While peers have caught up over the years, especially Canadian Pacific, Canadian National was long the highest-margin (lowest operating ratio, or OR) Class I railroad due to being the precision railroading pioneer in the 2000s. Recall that PSR architect Hunter Harrison left CN in 2009 and subsequently ended up applying his playbook at CP. Historically speaking, CN bolstered its velocity by making greater use of distributed-power locomotives and extending sidings at port staging areas. Running a scheduled railroad requires commitment to on-time train departures from both employees and customers queuing cars for departure. We think PSR is still in CN's DNA, though over the past few years, we sense management was focused more on growth than margins (albeit growth has been tempered in recent years by external events like congestion, strikes, blockages, tough weather, and so forth).