Canadian transportation stocks are set to offer intriguing opportunities for investors in 2025, riding the waves of economic recovery, infrastructure development, and global trade dynamics. From railways to airlines and trucking, the sector presents a variety of options with strong historical performance and exciting forward-looking strategies. But as with any journey, there are some bumps to watch out for along the tracks. Let's dig into the key players, recent earnings, and future outlooks to help you chart the right course.

CNR

Canadian National Railway (TSX:CNR), often hailed as the backbone of Canadian freight transportation, has faced headwinds this year. Labour stoppages and wildfires earlier in 2024 disrupted operations and forced CNR to revise its profit forecast downward. The transportation stock now expects low single-digit growth in adjusted diluted earnings per share instead of earlier, more optimistic targets.

However, CNR remains a giant in its sector, with a vast network that connects Canadian ports to the U.S. and beyond. Its steady dividend yield of around 2.2% continues to make it a solid defensive play for long-term investors looking for resilience in their portfolios. The long-term outlook is bolstered by anticipated recovery in freight volumes and infrastructure investments.

CPKC

Meanwhile, Canadian Pacific Kansas City (TSX:CP) has been making waves after its transformative merger with Kansas City Southern. Becoming the first railway to seamlessly connect Canada, the U.S., and Mexico. The railway giant has been expanding its routes and capturing the opportunities from increased North American trade, particularly as near-shoring accelerates in manufacturing.

While CPKC's dividend yield sits at a modest 0.7%, the transportation stock's growth prospects are compelling. Recent earnings reflect strong revenue growth driven by new corridors and rising demand for cross-border transportation. Investors looking for capital appreciation might find CPKC's long-term potential hard to resist as it solidifies its competitive edge.

TFII

On the trucking side, TFI International (TSX:TFII) continues to stand out as a leader. TFI has been a poster child for steady growth through organic improvements and smart acquisitions. The transportation stock's recent earnings were marked by a 6.8% core pricing increase and rising volumes, thus delivering strong revenue and earnings per share (EPS) growth.

Management's disciplined approach to cost controls and its ability to integrate acquisitions effectively position TFI as a standout performer in an otherwise competitive industry. The trucking sector is also poised to benefit from ongoing e-commerce demand and supply chain re-shoring trends in North America. For investors seeking a transportation stock that balances growth with stability, TFI International remains a compelling option.

What to watch

Looking at the broader sector, macroeconomic trends are creating tailwinds and headwinds alike. Near-shoring and on-shoring manufacturing in North America are expected to increase freight volumes over the medium term, thereby benefiting rail and trucking companies like CNR, CPKC, and TFI International. However, potential risks include tariff policies, fuel price volatility, and inflation-driven cost pressures that could affect margins across the board.

For dividend investors, Canadian transportation stocks also offer steady payouts. CNR's reliable dividend yield of 2.2% and history of dividend growth make it a standout for income seekers. On the growth side, CPKC offers the long-term potential of capital gains as its expanded network unlocks value. TFI International, with its impressive earnings momentum, strikes a balance between growth and dividends.

Looking ahead to 2025, government infrastructure spending in Canada and increased trade across North America will act as catalysts for the transportation industry. Railways will likely see higher freight volumes, driven by agriculture, energy, and industrial goods. Meanwhile, trucking companies stand to benefit from shorter-haul shipments and growing demand for logistics services tied to e-commerce.

Bottom line

Canadian transportation stocks offer a range of opportunities, whether you're looking for growth, dividends, or a mix of both. Canadian National Railway and Canadian Pacific Kansas City remain top picks for investors focused on rail and freight. TFI International leads the trucking segment with its disciplined expansion strategy. As we approach 2025, keeping an eye on earnings trends, trade policies, and economic shifts will be key to navigating this sector successfully.