CN is expanding its presence at several Gulf Coast ports. Image source: Canadian National Railway.

When North America's only transcontinental railroad, Canadian National Railway Company (NYSE:CNI)last reported earnings, not only did it beat estimates for profits, but it also showed strong improvement in a number of key metrics. With the second-quarter report set to come out on July 20, what can investors expect?

Let's take a closer look at the key metrics and numbers that investors should pay attention to when the company reports next week. 

Lower is better in this key metric 
Last quarter, the company's operating ratio fell from almost 70% to 65.7%. And while that improvement was largely a product of a milder winter versus the year before, it's still higher than the company's targeted ratio. With the second quarter being less affected by the weather, it's likely that the railroad improved this metric from the first quarter. 

Last year's first quarter operating ratio was 59.6%. With a lot of factors in the company's favor, including strong economic growth and the strength of the U.S. dollar potentially driving more Canadian goods across the border, there's a good chance this metric gets even better. 

Moving more goods  
Rail ton-miles is a critical measure behind driving better operational efficiency and profits. In short, this is a measure of how far it moves how many tons of freight. The farther it moves more freight, the more revenue it generates. The key here is how it increases RTMs. If the growth is just a product of expanding the railway, then not as much of that revenue will reach the bottom line. 

Here's a look at how CN -- as it's commonly called -- did last quarter in a number of key metrics that measure its ability to move more goods faster and more cheaply:

Source: CN Q1 2015 earnings presentation.

In short, CN is getting more production out of its assets, moving more goods farther and faster, and keeping goods at the terminal for shorter periods of time. If these trends continue, that will allow CN to increase RTMs even further, while continuing to drive that operating ratio down even more. 

Investing in growth 
Railroads are incredibly capital intensive. It's important that the company continue to strike a balance between spending to expand its network, while leveraging its assets as much as possible to maximize profits, and also investing to make its railroad safer. 

The company announced that it was slightly increasing its capital expenditure plans for the year in last quarter's earnings presentation, adding $100 million Canadian to its $2.7 billion Canadian budget for 2015. With recent deals to expand its presence at several major Gulf of Mexico ports, it's possible that even more future capex expansion could occur, but it's not clear how soon that would happen. 

Either way, it's probably a positive when more capex is tied to long-term expansion of service. Considering that the Gulf Coast is expected to experience increased freight service based on the expansion of the Panama Canal, this is very likely to be a source of sustainable long-term growth for the railroad. 

Returning cash to investors while continuing to grow 
When CN reported in April, it reaffirmed its outlook for the rest of 2015, including a 25% increase in the dividend, with a long-term target of a 35% payout ratio -- meaning 35% of profits paid back in dividends. Here's a look at the 10-year trends:

CNI Payout Ratio (TTM) Chart

CNI Payout Ratio (TTM) data by YCharts.

During the past decade, CN has significantly increased its dividend, and its payout ratio has risen slowly over time, while the railroad focused on investing in growth. While it still has strong growth ambitions, management is aiming to continue to gradually grow the dividend faster than earnings, until it reaches 35% of profits. 

CN has been an aggressive repurchaser of stock for years, having bought back more than one-quarter of shares outstanding during the past decade -- and it doesn't seem to be slowing down. Last October, the board approved the repurchase of up to 28 million shares by October 23, 2015.

Through the end of last quarter, it had repurchased 11 million, good for about a 2% reduction in shares outstanding. Considering that the stock price has fallen sharply since the beginning of the year, it's possible that management acted aggressively to repurchase shares during the quarter:

CNI Chart

CNI data by YCharts.

When it comes to profits, management is holding firm on its expectations for double-digit adjusted earnings growth for the full year. 

What to expect? 
Railroads can be somewhat cyclical, because their business is essentially all about moving goods from producer to consumer. Now looks like a good time on the cyclical front, with relatively strong economics in the markets that CN operates in. 

With that in mind, keep an eye on the company's operational execution and capital management, because that's what will drive the end result, as well as set the stage for the years ahead.