Canadian Pacific Kansas City (NYSE:CP) FY Conference February 19, 2026 08:05 AM ET Company ParticipantsChris de Bruyn - EVP of Finance and CFOKeith Creel - President and CEOConference Call ParticipantsBrandon Oglenski - Airline and Transport AnalystNone - AnalystBrandon OglenskiAll right, good morning, everyone. Welcome to day three of Barclays 43rd Annual Industrial Select Conference. I'm Brandon Oglenski, airline and transport analyst, and very excited to be kicking off, day three here with Canadian Pacif ...

Financial Data and Key Metrics Changes - Fourth quarter revenues totaled $738 million, down 2% year-over-year, with full-year revenues also declining by 2% [26] - Adjusted operating income was $11.3 million, and adjusted operating margin was 1.5% [26] - Adjusted EPS was $0.05, with consolidated gains on sale of property and equipment totaling $2.4 million, down from $6.5 million in the prior year [27] Business Line Data and Key Metrics Changes - Truckload transportation services revenue for the quarter was $513 million, down 3%, with revenues net of fuel surcharges also declining by 3% year-over-year [27] - Dedicated fleet revenue net of fuel was $292 million, up 1%, representing 65% of TTS trucking revenue, up from 63% a year ago [28] - One-way trucking revenue net of fuel was $156 million, a decrease of 8%, with average trucks decreasing by 10% year-over-year [30] Market Data and Key Metrics Changes - Logistics revenue was $208 million, representing 28% of total fourth quarter revenues, with revenues decreasing 3% year-over-year [34] - Intermodal revenues increased 24% almost entirely from higher volume, while final mile revenues increased 4% year-over-year [35] - The overall portfolio is increasingly more durable and resilient, improving revenue stability and enhancing the ability to produce steady revenue and earnings growth [21] Company Strategy and Development Direction - The company is focused on executing its strategy to position the business for revenue and earnings growth as demand returns, including restructuring its one-way trucking business [6][9] - The acquisition of FirstFleet is expected to enhance the company's dedicated business and provide a more scalable platform for sustainable growth [7][18] - The company aims to drive growth in core business, operational excellence, and capital efficiency as part of its strategic priorities [12][15] Management's Comments on Operating Environment and Future Outlook - Management sees signs of encouragement for the industry and expects a more positive outlook for 2026 due to ongoing capacity attrition and early signs of demand improvement [6][21] - The company acknowledges challenges in the first quarter due to significant storms and ongoing restructuring but anticipates a material inflection in earnings by Q2 [55][103] - Management remains confident in the company's strategy and execution, focusing on controlling what can be controlled to create long-term value [46] Other Important Information - The company has reduced costs by approximately $150 million over the last three years, with a focus on structural and sustainable savings [14] - The acquisition of FirstFleet was completed for a total purchase price of $282.8 million, expected to be cash flow accretive [39] - The average age of the truck and trailer fleet at the end of the fourth quarter was 2.7 and 5.6 years, respectively [44] Q&A Session Summary Question: What is the normalized earnings power expected for the company? - Management acknowledges the complexity of the current situation but sees opportunities for earnings growth in 2026, particularly from the restructuring and the acquisition of FirstFleet [50][52] Question: Can you elaborate on the one-way restructuring and its impact on rates? - Management explains that contract rate renewals have a lag effect, and the guidance reflects this. The focus is on yield and optimizing the fleet for better service outcomes [60][62] Question: What are the expected benefits from the FirstFleet acquisition? - Management anticipates $18 million in cost synergies, with a significant portion expected to be realized within 2026, leading to margin improvements [78][80] Question: How does the company view the industrial markets in 2026? - Management expresses optimism about the industrial markets, particularly in relation to the Mexico cross-border business, which is expected to perform well [95] Question: What are the expectations for Q1 margins and operating income? - Management acknowledges challenges in Q1 due to weather and restructuring but views these as temporary and expects improvements as the year progresses [102][103]

Financial Data and Key Metrics Changes - Fourth quarter revenues totaled $738 million, down 2% year-over-year, with full-year revenues also declining by 2% [26] - Adjusted operating income was $11.3 million, and adjusted operating margin was 1.5% [26] - Adjusted EPS was $0.05, with consolidated gains on sale of property and equipment totaling $2.4 million, down from $6.5 million in the prior year [27] Business Line Data and Key Metrics Changes - Truckload transportation services revenue for the quarter was $513 million, down 3%, with revenues net of fuel surcharges also declining by 3% year-over-year [27] - Dedicated fleet revenue net of fuel was $292 million, up 1%, representing 65% of TTS trucking revenue, up from 63% a year ago [28] - One-Way trucking revenue net of fuel was $156 million, a decrease of 8%, with average trucks decreasing by 10% year-over-year [29] Market Data and Key Metrics Changes - The Dedicated business is expected to grow significantly with the acquisition of FirstFleet, which will increase Dedicated's share of TTS revenue from approximately 43% to over half [20] - Intermodal revenues increased by 24%, while Final Mile revenues increased by 4% year-over-year [35] - Spot rates performed consistent with seasonal trends, with expectations for an upward trend throughout the year as capacity exits and demand improves [24] Company Strategy and Development Direction - The company is focusing on restructuring its One-Way trucking business to enhance profitability and fleet utilization [33] - The acquisition of FirstFleet is aimed at accelerating the shift towards higher-margin, more resilient Dedicated business [18] - The company plans to drive growth in core business, operational excellence, and capital efficiency as part of its strategy for 2026 [12][15] Management's Comments on Operating Environment and Future Outlook - Management sees signs of encouragement for the industry and expects a more positive outlook for Werner in 2026 due to ongoing capacity attrition and early signs of demand improvement [6] - The restructuring actions taken in Q4 are expected to yield noticeable profitability enhancements by Q2 2026 [53] - Management acknowledges the challenges posed by recent storms but remains optimistic about the company's ability to generate operating leverage and improved earnings performance as demand normalizes [44] Other Important Information - The company has reduced costs by approximately $150 million over the last three years, with a focus on structural and sustainable savings [14] - The total purchase price for FirstFleet was $282.8 million, funded through a combination of cash and debt [39] - The average age of the truck and trailer fleet at the end of the fourth quarter was 2.7 and 5.6 years, respectively [43] Q&A Session Summary Question: What is the normalized earnings power expected for the company? - Management sees opportunities for earnings growth in 2026, emphasizing that the restructuring of One-Way will not hinder participation in market inflections [50][52] Question: Can you elaborate on the One-Way restructuring and its impact on rates? - The restructuring is aimed at improving profitability and fleet utilization, with a focus on specialized freight [57][60] Question: What is the expected impact of FirstFleet on profitability? - FirstFleet's margins are lower than Werner's Dedicated margins, but identified cost synergies of $18 million are expected to improve margins significantly over time [76][78] Question: How does the company view the industrial markets in 2026? - Management expresses optimism about the industrial markets, particularly in relation to the Mexico cross-border business, which is performing well [93] Question: What are the expectations for Q1 margins and operating income? - Management acknowledges challenges from severe weather but anticipates some degree of margin improvement compared to the previous year [100]

Financial Data and Key Metrics Changes - Fourth quarter revenues totaled $738 million, down 2% year-over-year, with full-year revenues also declining by 2% [19] - Adjusted operating income was $11.3 million, and adjusted operating margin was 1.5% [19] - Adjusted EPS was $0.05, with consolidated gains on sale of property and equipment totaling $2.4 million, down from $6.5 million in the prior year [19] Business Line Data and Key Metrics Changes - Truckload transportation services revenue for the quarter was $513 million, down 3%, with revenues net of fuel surcharges also declining by 3% year-over-year [19] - Dedicated fleet revenue net of fuel was $292 million, up 1%, representing 65% of TTS trucking revenue, an increase from 63% a year ago [21] - One-way trucking revenue net of fuel was $156 million, a decrease of 8%, with average trucks decreasing by 10% year-over-year [22] Market Data and Key Metrics Changes - The dedicated business continues to perform well, with a strong pipeline of opportunities and early realization of rate increases [6] - Logistics revenue was $208 million, representing 28% of total fourth quarter revenues, with intermodal revenues increasing by 24% [25] - Spot rates performed consistent with seasonal trends, with expectations for an upward trend throughout the year as capacity exits and demand improves [17] Company Strategy and Development Direction - The company is focusing on restructuring its one-way trucking business to enhance profitability and fleet utilization [24] - The acquisition of FirstFleet is expected to accelerate the shift towards higher-margin, more resilient dedicated business [14] - The company aims to drive growth in core business, operational excellence, and capital efficiency as part of its strategic priorities [10] Management's Comments on Operating Environment and Future Outlook - Management sees a more positive outlook for 2026, with signs of demand improvement and ongoing capacity attrition [4] - The restructuring actions taken are expected to result in noticeable profitability enhancements by the second quarter of 2026 [6] - Management acknowledges the challenges posed by recent storms but remains optimistic about the company's ability to adapt and grow [63] Other Important Information - The company has reduced costs by approximately $150 million over the last three years, with a focus on structural and sustainable savings [10] - The total purchase price for FirstFleet was $282.8 million, funded through a combination of cash and debt [29] - The average age of the truck and trailer fleet at the end of the fourth quarter was 2.7 and 5.6 years, respectively [32] Q&A Session Summary Question: What is the normalized earnings power expected for 2026? - Management sees opportunities for earnings growth and believes the restructuring will lead to a more agile operation, complemented by the acquisition of FirstFleet [37] Question: Can you explain the one-way restructuring and its impact on rates? - The restructuring is aimed at improving profitability and fleet utilization, with a focus on specialized services [40] Question: What is the expected impact of FirstFleet on profitability? - FirstFleet's margins are lower than the company's dedicated margins, but identified cost synergies of $18 million are expected to improve margins significantly over time [50] Question: How does the company view the industrial markets in 2026? - Management expresses optimism about the industrial markets, particularly in relation to packaging and e-commerce, which are expected to drive demand [60]

Financial Data and Key Metrics Changes - In Q4 2025, revenues excluding fuel surcharge were $1.3 billion, up 4% year-over-year [9] - Adjusted income from operations for Q4 was $38 million, a decline of 15% compared to the previous year [9] - Adjusted diluted earnings per share for Q4 was $0.13, down from $0.20 a year ago [9] - Net debt leverage improved to 0.3x at the end of Q4 from 0.5x at the end of Q3 [16] Business Line Data and Key Metrics Changes - Truckload revenue, excluding fuel surcharge, was $610 million in Q4, up 9% year-over-year, with operating income increasing by 16% to $23 million [11] - Intermodal revenues, excluding fuel surcharge, totaled $268 million for Q4, reflecting a 3% decline year-over-year despite a 3% volume growth [13] - Logistics revenue, excluding fuel surcharge, was $329 million in Q4, up 2% year-over-year, but income from operations decreased to $3 million from $9 million last year [14] Market Data and Key Metrics Changes - The company experienced a sluggish demand environment in November and December, leading to a significant volume shortfall [10] - The market saw a tightening in December, with shippers beginning to seek additional capacity as inventory levels were drawn down [19][20] - Regulatory actions are expected to continue driving supply attrition, impacting market conditions [20] Company Strategy and Development Direction - The company aims to exit the down cycle with improved operational efficiency and cost savings, targeting an additional $40 million in cost savings for 2026 [8][17] - There is a strategic focus on growing the Dedicated offering, which now comprises nearly 70% of the fleet, enhancing resilience in the Truckload segment [7] - The company plans to leverage its multimodal offerings and optimize volumes between Network and Logistics based on market conditions [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that Q4 results fell short of expectations due to challenging market conditions and poor weather [5] - There is optimism about the normalization of market conditions, driven by regulatory actions and supply attrition [6][20] - The company anticipates a stronger second half of 2026, with expectations of improved demand and continued cost savings [17][18] Other Important Information - The company announced leadership changes, with Mark Rourke transitioning to Executive Chairman and Jim Filter becoming the new CEO [26] - The company has a strong balance sheet, with $403 million in debt and $202 million in cash, allowing for potential acquisitions [16] Q&A Session Questions and Answers Question: What are the supply-side assumptions that underpin your guide? - The company expects supply to continue exiting the market due to regulatory enforcement, which will influence the pace of recovery [34] Question: Can you explain the Dedicated revenue per truck per week lag in Q4? - The lag was primarily due to unplanned automotive shutdowns and startup costs impacting operating ratios [40][41] Question: How much of the $40 million cost savings is volume/revenue dependent? - The cost savings are largely productivity-based, with expectations that they will be more evident as volume increases [44][45] Question: What are the implications of the merger application and domestic intermodal commentary? - The company remains confident in its intermodal position and continues to grow, particularly in differentiated markets [50][51] Question: How much rate improvement can be expected from supply-side changes without demand improvement? - The company believes that supply-side reductions will create conditions for rate adjustments, but it may take several bid cycles to fully materialize [86]

Financial Data and Key Metrics Changes - For Q4 2025, revenue decreased by 2% year-over-year, while operating income improved by 19%, and diluted earnings per share increased by 24% compared to the prior year period [11] - For the fiscal year 2025, revenue declined by 1%, while operating income increased by 4% [12] - The company executed over $25 million in tracked savings in Q4, achieving a run rate of over $100 million in annualized cost savings [15] Business Line Data and Key Metrics Changes - Intermodal volumes in Q4 were down 2% year-over-year, with transcontinental volumes down 6% and eastern loads up 5% [33] - The final mile business experienced soft market demand across furniture, exercise equipment, and appliances, with expectations of a $90 million revenue headwind in 2026 due to the loss of legacy appliance-related business [21][22] - The dedicated business maintained flat operating income compared to 2024 results despite a lower fleet count, with strong new truck sales in Q4 [26] Market Data and Key Metrics Changes - The truckload market became noticeably tighter beginning the week before Thanksgiving, driven by higher levels of regulatory enforcement [22] - Customers are consolidating logistics providers, leading to the highest customer retention since 2017 [18] - Demand in Q4 aligned with expectations, with a solid peak season supported by early imported freight needing to move inland [17] Company Strategy and Development Direction - The company is focused on disciplined growth through operational excellence, leveraging investments in people, technology, and capacity to create sustainable competitive advantages [9] - The strategy for 2026 includes continuing to repair margins and maintaining operational excellence while managing costs [10] - The company is committed to engaging in discussions regarding Class 1 rail consolidation and converting highway truckload shipments to intermodal [32] Management's Comments on Operating Environment and Future Outlook - The freight market is described as fragile, with limited elasticity in supply, indicating that small increases in demand could create significant market changes [41] - Management remains cautious about the market outlook, emphasizing the need to monitor customer feedback and demand trends in early 2026 [56] - The company is optimistic about its operational momentum and capacity to deploy capital to meet customer needs [16] Other Important Information - The company spent $575 million in capital reinvesting in its business in 2025 and repurchased $923 million worth of shares, the largest annual amount in its history [12] - The balance sheet remains healthy, with leverage just under the target of one times trailing 12-month EBITDA [13] Q&A Session Summary Question: Can you elaborate on the freight market's fragility? - Management indicated that the supply side has not changed significantly since Thanksgiving, and small demand upticks could create larger market ripples due to limited elasticity [40][41] Question: What is the opportunity for cost savings in 2026? - Management expressed confidence in exceeding the $100 million cost savings target, citing successful execution of various cost initiatives [50] Question: How does the recent tighter capacity freight market impact expectations for dedicated sales? - Management noted that while it is too early to see significant changes, there is optimism due to strong new customer acquisitions and a robust sales pipeline [73]

Financial Data and Key Metrics Changes - For Q4 2025, revenue decreased by 2% year-over-year, while operating income improved by 19% and diluted earnings per share increased by 24% compared to the prior year period [10] - For the fiscal year 2025, revenue declined by 1%, while operating income increased by 4% [11] - The company executed over $25 million in tracked savings in Q4, achieving a run rate of over $100 million in annualized cost savings [13] Business Line Data and Key Metrics Changes - The final mile business experienced soft market demand, particularly in furniture, exercise equipment, and appliances, while fulfillment business saw positive demand driven by off-price retail channels [20] - The dedicated business maintained flat operating income compared to 2024 results despite a lower fleet count, with strong new truck sales in Q4 [26] - Intermodal service volumes were down 2% year-over-year, with transcontinental volumes down 6% in the quarter, while eastern loads were up 5% [33] Market Data and Key Metrics Changes - Demand in Q4 aligned with expectations, with a tightening market observed around Thanksgiving continuing through year-end [15] - Customers view recent market tightening as temporary or seasonal rather than a structural shift, with many consolidating logistics providers [17] - The freight market is described as fragile, with limited elasticity in supply, indicating that small increases in demand could create significant market changes [40] Company Strategy and Development Direction - The company is focused on disciplined growth through operational excellence and leveraging investments in people, technology, and capacity [7][8] - A commitment to repairing margins to drive long-term value for shareholders is emphasized, with a focus on maintaining operational excellence [9] - The company is actively pursuing opportunities to convert highway truckload shipments to intermodal, positioning itself as a primary participant in intermodal discussions [32] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing inflationary cost pressures but highlights successful cost management and operational efficiencies [11] - The company enters 2026 with solid momentum operationally and financially, with a focus on maintaining a disciplined approach to growth [14] - Management expresses cautious optimism regarding market conditions, emphasizing the need for continued customer engagement and feedback [53] Other Important Information - The company spent $575 million on capital reinvestment in 2025 and executed a record $923 million in share repurchases [11][12] - The balance sheet remains healthy, with leverage just under the target of one times trailing 12-month EBITDA [12] Q&A Session All Questions and Answers Question: Can you elaborate on what you mean by the freight market being fragile? - Management indicates that the supply side has not changed significantly since Thanksgiving, and small increases in demand could create larger ripples in the market due to limited elasticity [39][40] Question: What is the opportunity for cost savings in 2026? - Management expresses confidence in exceeding the $100 million target for cost savings, citing successful execution of various cost initiatives [46] Question: How does the recent tighter capacity freight market impact expectations for dedicated sales? - Management acknowledges that while it is too early to see significant changes, there is optimism due to strong new customer acquisitions and a robust sales pipeline [69]

Financial Data and Key Metrics Changes - Revenue was roughly flat year over year, while operating income improved by 8% and diluted earnings per share improved by 18% compared to the prior year period [10][11] - Despite inflation in insurance, wages, employee benefits, and equipment costs, productivity and cost management efforts offset these headwinds [10][11] Business Line Data and Key Metrics Changes - Intermodal volumes declined by 1% year over year, but the company outperformed the broader truckload market decline due to customers converting freight to intermodal [15][32] - The final mile business faced challenges with soft demand for furniture, exercise equipment, and appliances, but positive demand was noted in the fulfillment network driven by off-price retail [20][21] - Integrated Capacity Solutions (ICS) saw modest sequential improvement in volumes, with rates up low to mid-single digits and winning volume with new customers [22] Market Data and Key Metrics Changes - Overall demand trended below normal seasonality for much of the quarter, with truckload capacity continuing to exit the market [14] - Truckload spot rates remained under pressure throughout the quarter, but recent regulatory developments are impacting capacity [14][66] Company Strategy and Development Direction - The company is focused on operational excellence, scaling investments, and repairing margins to drive stronger financial performance [5][6] - A significant emphasis is placed on lowering the cost to serve, with a goal of removing $100 million in structural costs from the business [12][13] - The company aims to leverage its reputation for service excellence to drive strategic growth and maximize returns on investments [6][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to rail consolidation and emphasized the importance of long-term agreements with major rail providers [7][31] - The company expects to continue generating significant cash flow and remains focused on strong returns with deployed capital [12][13] - Management acknowledged the challenges in the current market but remains optimistic about future growth opportunities [10][34] Other Important Information - The company has made progress in its initiative to lower costs, having eliminated over $20 million in the quarter [12] - The company is leveraging technology and automation to improve operational efficiency and customer satisfaction [81][84] Q&A Session Questions and Answers Question: Can you provide details on the $20 million cost savings and how it played out by segment? - Management indicated progress across all areas of the business, with improvements in efficiency and productivity noted in intermodal and dedicated services [37] Question: What is the outlook for pricing and how does it relate to the cost savings initiative? - Management clarified that while the rate environment has been challenging, the cost savings initiative is expected to enhance performance durability when the market improves [44][46] Question: How do you expect loads and volumes to trend in the upcoming quarter? - Management noted that while the ocean peak season may have ended, domestic demand is expected to remain strong as customers prepare for the holiday season [75]

Group 1: Canadian National Railway Company (CNI) - Jim Cramer recommended buying Canadian National Railway Company, stating it is "way too cheap" [1] - Canadian National Railway shares gained 1.6% to settle at $93.93 on Thursday [4] Group 2: MP Materials Corp. (MP) - Cramer advised against purchasing more shares of MP Materials, suggesting investors are fine with their current holdings [1] - DA Davidson analyst Matt Summerville maintained a Buy rating on MP Materials and raised the price target from $32 to $82 [1] - MP Materials shares gained 0.9% to settle at $63.03 on Thursday [4] Group 3: Resideo Technologies, Inc. (REZI) - Cramer described Resideo Technologies as "interesting, even up here" [2] - Morgan Stanley analyst Erik Woodring upgraded Resideo Technologies from Equal-Weight to Overweight and raised the price target from $24 to $35 [2] - Resideo Technologies shares rose 1.4% to close at $36.71 [4]

Financial Data and Key Metrics Changes - The company reported second quarter earnings per share of $3.15, with adjusted earnings per share at $3.30, reflecting a 12% increase compared to last year's adjusted results [5][12] - Operating revenue reached $6.2 billion, a 2% improvement year-over-year, while freight revenue set a record at $5.8 billion, increasing by 4% [8][12] - The adjusted operating ratio improved to 58.1%, a 230 basis point enhancement from the previous year [5][12] Business Line Data and Key Metrics Changes - Bulk segment revenue increased by 10% with an 11% rise in volume, driven by strong coal demand and export shipments [18] - Industrial segment revenue grew by 4% on a 3% increase in volume, with solid rock shipments and industrial chemicals, although forest products remained soft [19] - Premium revenue decreased by 4% despite a 1% increase in volume, attributed to a mix impact from international intermodal shipments [19] Market Data and Key Metrics Changes - The company experienced a surge in coal shipments, with a 30% increase in coal and renewable shipments handled efficiently [27] - Intermodal volumes showed year-over-year growth, although automotive volumes declined due to reduced OEM production [20] - The company anticipates continued softness in the autos market and lower asset sales impacting other revenue in the upcoming quarters [14] Company Strategy and Development Direction - The company remains committed to operational excellence, safety, and service, aiming to maintain industry leadership through productivity improvements and strategic pricing [5][15] - A focus on capital deployment strategy remains unchanged, with ongoing investments in intermodal capabilities and infrastructure [15][25] - The company is exploring growth opportunities in various segments, including coal and industrial markets, while adapting to market changes [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving high single to low double-digit EPS growth consistent with three-year targets [15][37] - The company is prepared to handle potential volume moderation in the second half of 2025, while maintaining a focus on operational efficiency and customer service [14][81] - Management highlighted the importance of adapting to external pressures, including tariff implications and market uncertainties, while leveraging internal strengths [23][53] Other Important Information - The company announced advanced discussions regarding a potential business combination with Norfolk Southern, with no further comments until an agreement is reached [38] - The company has returned $4.3 billion to shareholders through share repurchases and dividends, marking the nineteenth consecutive year of annual increases [13] Q&A Session Summary Question: Concerns about potential distractions from organic momentum due to discussions of a business combination - Management emphasized the importance of adapting to industry changes and maintaining operational efficiency, viewing the discussions as a strategic opportunity rather than a distraction [41][44] Question: Thoughts on reciprocal switching and giving shippers more options - Management reiterated the commitment to providing high-level service and innovative solutions to meet diverse customer needs, regardless of industry changes [50][53] Question: Feedback from shippers regarding potential consolidation - Management refrained from discussing specific shipper feedback during ongoing negotiations, emphasizing the importance of confidentiality [90] Question: Progress on automation and regulatory changes - Management noted positive momentum in discussions with the FRA regarding automation and safety technologies, highlighting ongoing efforts to improve operational efficiency [115][116] Question: Insights on coal market sustainability and customer sentiment - Management acknowledged the current strength in coal demand driven by natural gas prices, while remaining cautious about long-term market shifts [132][133]