Canadian National (CNI 0.45%) reported its first-quarter results earlier this week, and it appears that the railroad is beginning to recapture momentum lost during the challenging winter. With any luck, the term "polar vortex" will fade back to obscurity, and North America's railroads can look forward to normal winter conditions.

For the first quarter, total revenues increased an impressive 9% to $2.69 billion, and operating income increased 5% to $820 million. Adjusted net income of $551 million was an improvement of 6% from the year earlier period, and diluted earnings per share rose 8%.

Here are three important takeaways from Canadian National's latest earnings release, and what it means for investors.

Surpassing expectations?
Canadian National delivered adjusted EPS of $0.66, beatings analysts' consensus estimate of $0.63.

The railroad reports its earnings in Canadian dollars; considering that a large portion of its revenues and expenses is denominated in U.S. dollars, the fluctuation of the Canadian to U.S. dollar exchange rate can have a material effect on the company's financial results.

The weakening Canadian dollar resulted in a positive impact to net income of $26 million, or $0.03 per diluted share, in the first quarter of 2014. If it were not for the declining value of the Canadian dollar, Canadian National wouldn't exceeded expectations, though it would have met them.

Source: Canadian National

Diversified revenue growth
During the quarter, Canadian National achieved revenue growth in six of seven segments. This was led by a 23% increase in petroleum and chemicals, and a 12% gain in intermodal. Canadian National is clearly benefiting from one of the 2014 trends affecting railroads, namely the increased movement of oil by rail.

The increase in revenue outpaced the gains in carloads and revenue ton-miles of 1% and 5% respectively. Revenue ton-miles, or RTM, measures the relative weight and distance of rail freight transported. Why did revenue growth exceed the increase in freight traffic? Canadian National achieved better pricing on contract renewals, moved more lucrative freight, including crude oil, and benefited from a weak Canadian dollar.

However, a concern for both Canadian National and the broader economy was the 4% revenue decline in the automotive segment and what it means for North American growth prospects. A recovery in automotive freight during the second quarter would be a positive signal, and would support the notion that the economic recovery has not lost momentum.

Lots of free cash
Canadian National has long been praised for its ability to generate free cash flow, and it did not disappoint this quarter. It generated $494 million of free cash, more than three times the level of the year earlier period. 

The company continued its previously announced share repurchase program during the quarter, buying 6.3 million shares at a total cost of $365 million. With so much cash and a promising outlook for 2014, investors should be optimistic about a dividend raise prior to year end as well.

Canadian National stock pays a quarterly dividend of $0.25 per share, equating to dividend yield of 1.6%. Respectable, but not outstanding. 

See you in Chicago
If you travel by air frequently, you likely avoid connecting through Chicago during the winter if at all possible. Turns out, a few railroads feel the same way.

With the 2008 purchase of Elgin, Joliet, & Eastern Railway Company (EJ&E), Canadian National became North America's only transcontinental railway. It established a bypass around the western side of heavily congested Chicago-area rail hub, alleviating substantial bottlenecks for both regional and intercontinental rail traffic subject to lengthy delays entering and exiting Chicago freight yards.

The benefit of that purchase was evident in Canadian National's first quarter. Unlike competitor Canadian Pacific (CP -0.45%) which moved 5% fewer RTM during the quarter, Canadian National actually moved 5% more RTM. During the conference call with analysts and investors, Canadian Pacific identified Chicago congestion as one of the key challenges of the first quarter.   

Foolish bottom line
Like Canadian Pacific, Canadian National reaffirmed its guidance for 2014: double digit earnings-per-share growth, and free cash flow in the range of $1.6 billion-$1.7 billion. The railway appears to be regaining its momentum from a difficult winter season, and is set to fully leverage its outstanding franchise that provides investors with exposure to the entire North American economy. However, investors should look for a recovery in automotive freight during the second quarter as a positive sign not just for Canadian National, but for the broader economy as well.