Core Viewpoint - Canadian Pacific Kansas City (CPKC) has successfully ratified 16 tentative collective bargaining agreements with various unions in the United States, enhancing wages for approximately 700 railroaders across multiple states [1][2]. Group 1: Agreements and Ratifications - All new five-year agreements have been ratified, benefiting railroaders in states including Illinois, Indiana, Louisiana, Minnesota, Mississippi, Missouri, New York, North Dakota, Oklahoma, Texas, and Wisconsin [1]. - An agreement with the Brotherhood of Locomotive Engineers and Trainmen (BLET) has been ratified, representing around 300 locomotive engineers operating in Illinois, Indiana, Minnesota, North Dakota, and Wisconsin [2]. - Five agreements have been ratified with the Brotherhood of Railway Carmen, covering 231 carmen across various properties [3]. - Five agreements have been ratified with the Transportation Communications Union (TCU/IAM) and American Railway and Airway Supervisors Association (ARASA), representing approximately 108 U.S. employees [4]. - Two agreements have been ratified with the National Conference of Firemen and Oilers (NCF&O), representing 26 hostlers and laborers [5]. - Three additional agreements have been ratified with various associations, covering a total of 23 employees in specific roles [6]. Group 2: Future Agreements - Two tentative five-year collective agreements have been reached with the International Brotherhood of Electrical Workers (IBEW), representing 76 electricians, pending ratification [7]. Group 3: Company Overview - CPKC is the first and only single-line transnational railway linking Canada, the United States, and Mexico, with a network of approximately 20,000 route miles and a workforce of 20,000 railroaders [8]. - The company provides extensive rail service and logistics solutions, contributing to economic growth across North America [2][8].

Group 1 - The article emphasizes the importance of returning to normalcy after the holiday season, indicating a preference for routine over the unpredictability of holiday schedules [1] - Leo Nelissen is identified as an analyst focusing on significant economic developments related to supply chains, infrastructure, and commodities, contributing to iREIT®+HOYA Capital [1] - The analysis aims to provide actionable investment ideas with a focus on dividend growth opportunities, highlighting the potential for income generation in the investment landscape [1]

Core Viewpoint - The merger application filed by Union Pacific (UP) and Norfolk Southern (NS) is under review by the Surface Transportation Board (STB), and its acceptance is not guaranteed [1][2][3] Group 1: Merger Application Review - Canadian Pacific Kansas City (CPKC) has received the UP-NS merger application and will review it thoroughly [1] - The STB must decide by January 18, 2026, whether to accept or reject the application based on its completeness [1] - If accepted, the STB's public interest review will consider a wide range of concerns, indicating that approval is not inevitable [2] Group 2: Implications of the Merger - The proposed UP-NS merger is unprecedented and could significantly alter the U.S. rail network, posing risks to customers, rail employees, and supply chains [3] - CPKC emphasizes the importance of assessing both short- and long-term public interest impacts, particularly regarding competition for rail customers [3] Group 3: Stakeholder Engagement - CPKC encourages stakeholders, including shippers and governments, to review the merger application and submit their comments to the STB [4] - Stakeholders should express concerns about potential limitations on rail shipping options, rate pressures, and service quality risks [4] Group 4: CPKC Overview - CPKC is the first and only single-line transnational railway connecting Canada, the U.S., and Mexico, with extensive access to major ports [5] - The company operates approximately 20,000 route miles and employs 20,000 railroaders, providing comprehensive rail services across North America [5]

Core Insights - The article discusses a rotation thesis from Big Tech investments to cyclical value, energy, and high-quality stocks that focus on dividend income and growth [1]. Group 1: Investment Focus - The emphasis is on transitioning investment strategies towards sectors that offer dividend growth opportunities, particularly in cyclical and energy stocks [1][2]. - The analysis aims to provide actionable investment ideas that align with major economic developments in supply chains and commodities [2]. Group 2: Analyst Background - Leo Nelissen is identified as an analyst specializing in economic developments related to supply chains, infrastructure, and commodities, contributing to the iREIT®+HOYA Capital team [2].

Core Viewpoint - Canadian Pacific Kansas City Limited (CP) is facing significant challenges in the rail industry, with downward revisions in earnings estimates and a decline in share price, despite some cautious optimism from analysts [1][6]. Financial Performance - CP's earnings estimates have been revised downward by 2.25% for Q1 2026, and by 2.92% and 3.78% for the years 2025 and 2026, respectively, indicating a lack of confidence from brokers [3]. - The company's share price has declined by 9.7% over the past year, reflecting broader industry pressures [3]. Operating Expenses and Financial Health - Operating expenses for CP have increased in 2025 primarily due to labor agreements, despite a reduction in fuel costs, which raises concerns about financial sustainability [4]. - High leverage and limited cash reserves are significant issues for CP, making it a less attractive investment option [4]. Market Position and Analyst Ratings - Kansas City Capital maintains a "Buy" rating for CP with a cautious outlook, while BofA has raised the price target from $82 to $84, indicating some level of confidence in CP's future performance [2]. - On the day of the announcement, CP's stock experienced a slight increase of 0.23%, with a market capitalization of approximately $68 billion and a trading volume of 1,374,232 shares [5].

Core Viewpoint - Canadian Pacific Kansas City Limited (CP) is currently facing multiple challenges that make it an unattractive investment option [1] Earnings Estimates - The Zacks Consensus Estimate for first-quarter 2026 earnings has decreased by 2.25% over the past 60 days, with downward revisions of 2.92% and 3.78% for 2025 and 2026, respectively, indicating a lack of confidence from brokers [2][3] - The current earnings estimates are 0.87 for the next quarter, 3.33 for the current year, and 3.82 for the next year, showing a downward trend in revisions [3] Price Performance - CP's stock has declined by 9.7% over the past year, while the Transportation - Rail industry has seen a growth of 3.3% [3] Operating Expenses - Operating expenses for CP rose by 1.5% year over year in the first nine months of 2025, with labor costs increasing by 0.7% despite a 3% decrease in fuel expenses [5][7] Financial Health - CP has high leverage, exiting Q3 2025 with cash and cash equivalents of C$411 million against long-term debt of C$21.5 billion, indicating insufficient cash to meet short-term obligations [8] - The company operates in a challenging macro environment characterized by economic uncertainty and geopolitical tensions [8] Industry Ranking - The rail industry has a Zacks Industry Rank of 175 out of 243, placing it in the bottom 27%, which negatively impacts CP's stock performance [9]

Core Thesis - Canadian Pacific Kansas City Limited (CPKC) is viewed positively due to its operational efficiency, steady earnings growth, and strong management, despite facing near-term volume challenges [1][4]. Financial Performance - CPKC reported Q3 2025 EPS of $1.10, slightly up from $1.09 year-over-year, with revenue increasing by 3% supported by 5% volume growth [2]. - The operating ratio improved by 220 basis points to 60.7%, even after accounting for a one-time derailment cost of 100 basis points [2]. - Management reaffirmed EPS growth guidance for 2025 at 10-14%, although Q4 volumes are down approximately 3% year-over-year [2][3]. Revenue Segments - The North American grain harvest, which contributes over 20% of CPKC's revenue, is expected to help mitigate the volume shortfall in the latter part of the year [3]. Shareholder Returns and Leverage - Over 90% of a 4% Normal Course Issuer Bid (NCIB) has been completed, indicating active shareholder returns, though net debt-to-EBITDA has increased to 3.2x [3]. - There is a noted trade-off between aggressive buybacks and maintaining balance sheet conservatism [3]. Market Position and Valuation - CPKC's valuation is considered elevated, with a preference for entry under a P/E of 20, ideally around the $90 range [4]. - The company is recognized for its long-term competitive advantages, credible management, and pricing power, but current volume headwinds suggest a cautious approach [4][5]. Investment Recommendation - The recommendation is to hold existing positions while waiting for a more attractive entry point for new investments, emphasizing the importance of acquiring the stock at the right price rather than at a premium valuation [5].

Company Overview - CPKC is a relatively new entity, having been formed 2.5 years ago from the merger of two established rail networks, making it the smallest railroad but the only one connecting all three North American nations [3]. Growth and Market Position - Despite facing a freight recession since its inception, CPKC has managed to lead the industry in growth, driven by the creation of new markets and synergies from its operations [3]. - The company emphasizes its growth is not solely dependent on economic conditions but rather on the markets it has developed and the self-help initiatives implemented across various business segments [3].

Summary of Canadian Pacific Kansas City (CPKC) Conference Call - December 02, 2025 Company Overview - **Company**: Canadian Pacific Kansas City (NYSE: CP) - **Industry**: Rail Transportation Key Points and Arguments 1. **Company Growth and Positioning**: CPKC is in its early stages of growth, having combined two established rail networks. Despite economic challenges, the company has led the industry in growth through market creation and synergies [2][3][4] 2. **Earnings Outlook**: CPKC aims for double-digit earnings growth, supported by cost control and a strong grain crop in Canada, with expectations of moving 73 million metric tons of grain [3][4] 3. **Intermodal and Automotive Growth**: The company has seen significant growth in domestic intermodal traffic, up 48% year-over-year, and anticipates continued growth in the automotive sector [5][6] 4. **Capital Expenditure Plans**: CPKC plans to reduce capital expenditures to a range of $2.6 billion to $2.8 billion in 2026, focusing on operational efficiencies and infrastructure investments [20][22] 5. **Revenue Synergies**: The company is on track to achieve $1.4 billion in revenue synergies by the end of 2026, driven by unique market connections and operational efficiencies [12][14] 6. **Market Dynamics**: CPKC is positioned to benefit from the resolution of trade disputes, particularly with China, which is expected to increase soybean movements [4] 7. **Regulatory Environment**: Concerns were raised about potential mergers in the industry (UP and NS), with CPKC's unique North-South positioning providing a competitive advantage. The complexity of regulatory approvals for such mergers is highlighted [44][45][49] 8. **Future Opportunities**: CPKC anticipates significant revenue growth from connecting Canadian and Mexican markets, with an expected annualized revenue of approximately $460 million from this initiative [39][40][41] Additional Important Insights 1. **Leadership Commitment**: CEO Keith Creel expressed strong commitment to CPKC, emphasizing the importance of legacy and the completion of integration efforts post-merger [17][18] 2. **Infrastructure Investments**: CPKC has made substantial investments in infrastructure, which are expected to yield operational efficiencies and support future growth [20][30] 3. **Partnerships and Collaborations**: The company is leveraging partnerships, such as with Americold, to enhance its service offerings and create additional growth opportunities [35][36] 4. **Market Diversification**: The company is capitalizing on the trend of market diversification between Canada and Mexico, which has been accelerated by recent tariff challenges [39][41] 5. **Shareholder Returns**: CPKC is planning to gradually increase its dividend payout ratio and is considering share buybacks as part of its capital allocation strategy [23][25] This summary encapsulates the key insights and strategic directions discussed during the CPKC conference call, highlighting the company's growth trajectory, market positioning, and future opportunities within the rail transportation industry.

Core Insights - CPKC has successfully integrated Kansas City Southern since the acquisition in 2021, focusing on growth and operational efficiency [3] - The company has achieved a 5% increase in volumes on a Revenue Ton Mile (RTM) basis this year, demonstrating strong performance in the industry [3] - CPKC is expected to report double-digit Earnings Per Share (EPS) growth for both the previous and current year, indicating robust financial health [4] - The company has maintained its position as an industry leader in safety, with improvements in train accident frequency and personal injury metrics [4]