Source: Canadian National.

The railroad industry in the U.S. has gotten a lot of attention from investors lately, as railroad companies have benefited from the recovering economy and the resulting demand for transporting more goods throughout the country. In Canada, Canadian National Railway (NYSE:CNI) has seen many of the same favorable trends, and Canada's abundance of natural resources has put the nation's largest railroad in position to profit from efforts like bringing energy products from hard-to-reach areas like the Alberta oil sands to market. In the Tuesday afternoon release of its fourth-quarter financial report, Canadian National gave shareholders exactly the results they wanted to see, with solid gains in revenue and earnings that pointed to continuing strength for the railroad going forward. Let's take a closer look at what Canadian National saw on the rails during the quarter and what its 2015 could look like.

Canadian National revs up its engines 

The headline numbers for Canadian National were uniformly impressive. Revenue for the quarter jumped 17% to C$3.21 billion, capping a successful 2014 in which the company saw an overall 15% gain in sales. Net income climbed 33% to C$844 million, resulting in earnings per share of C$1.03, which was C$0.06 higher than investors had expected.

Canadian National also posted a number of record results for the quarter and the year. Operationally, volumes for the full 2014 year hit record levels, with revenue ton-mile figures climbing 10% and carload counts up 8% from 2013. Looking more closely at where the railroad saw the most growth, revenue increases from petroleum and chemicals, grain and fertilizers, and metals and minerals all amounted to 20% or more, while intermodal transport climbed 13% and automotive segment showed gains of 12%. Even weaker areas like forest products and coal showed gains in the mid-single digit percentage range. Record grain crops in Canada helped support the railroad's results, and Canadian National pointed to what it called "strong energy markets" as well as pricing power in setting rates as helping to boost revenue.

Source: Canadian National.

One outstanding element of Canadian National's business is its operational efficiency. Operating ratios for the quarter came in at 60.7%, down more than four percentage points from the year-ago quarter. For the full year, Canadian National saw its operating ratio drop to 61.9%. By comparison, U.S. railroads have tended to have much higher operating ratios, showing the extent to which their Canadian counterpart has successfully contained costs and made the most of its opportunities for profit.

Canadian National executives were pleased with the results. As CEO Claude Mongeau noted, "CN delivered a strong fourth-quarter 2014 performance, concluding remarkable year characterized by brutal first-quarter winter weather, followed by a strong rebound starting in March and capped by record full-year freight volumes."

Can Canadian National keep up the pace?

Even though it set the bar high in 2014, Canadian National believes that 2015 could be even stronger. The railroad currently expects to post double-digit growth in earnings per share this year, and Mongeau sees "continued opportunities for growth in energy-related commodities, intermodal traffic, and commodities tied to U.S. housing construction, automotive sales, and other consumer spending."

Source: Canadian National.

Indeed, Canadian National is so confident looking forward that it decided to boost its dividend by 25%. The company boasts a long track record of dividend growth, citing average annual increases of 17% throughout its 20-year history as a publicly traded company.

One open question Canadian National will have to face, though, is the extent to which falling oil prices could take away one of its key growth drivers. Because of the weakness of the Canadian dollar, oil hasn't fallen in local-currency terms quite as much as U.S. investors have experienced. Yet if energy prices remain low, the fast growth in energy-related transport could decline. Moreover, even though fuel costs at Canadian National rose 6% for the quarter and 14% for the full 2014 year, investors can expect at least a partial offset in the form of lower expenses if energy stays weak.

Canadian National shareholders responded favorably to the news, sending share prices higher by more than 3% in the first hour of after-hours trading following the announcement. With its key transcontinental network of railroads, Canadian National should be able to lead the industry as long as economic conditions favor greater demand for transportation services in general.