Canadian National Earnings: Intermodal Activity in Retreat, but Network Productivity Gains Solid

Wide-moat railroad Canadian National's first-quarter revenue grew 12% year over year (removing foreign exchange) on higher fuel surcharges, core rate gains, and slight volume growth. Revenue came in ahead of our forecast because of strong yield improvement (up 12%). Relative to the first quarter of 2022, total volume rose slightly less than 1% on service improvement (hiring progress and less winter-weather disruption), strong Canadian grain (favorable harvest), higher export coal, and recovering auto carloads (increased vehicle production). These factors were largely offset by slowing industrial end markets and pronounced weakness in international intermodal activity rooted in retail-sector inventory destocking and loose capacity in the competing full-truckload sector.