We Expect Canadian National to Post Modest OR Improvement in 2024, Assuming no Rail Strike

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, and eventually CSX. Historically, 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 we sense management was focused more on growth than margins between 2019 and 2021, before the 2022 leadership changes (albeit growth was tempered by external events like congestion, strikes, blockages, and tough weather).