Summary of Canadian Pacific Kansas City (CPKC) Conference Call Company Overview - **Company**: Canadian Pacific Kansas City (NYSE: CP) - **Date**: February 18, 2026 - **Speakers**: Keith Creel (CEO), Chris Verone (IR) Key Points Industry and Operational Performance - **Current Operations**: The railroad is performing well with operating metrics at record levels for the first quarter, despite typical winter challenges [6][8] - **Volume Trends**: RTM (Revenue Ton Miles) is expected to show low single-digit positive growth for the quarter, driven by a record grain harvest of 85 million metric tons, which is 20% more than last year [8][9] - **Automotive Sector**: CPKC has outpaced the industry in automotive despite a down market, expecting continued growth in 2026 [11] - **Intermodal and International Growth**: The company is well-positioned in international intermodal and has seen positive developments with partners like Hapag-Lloyd [10] Financial Performance and Growth Projections - **Earnings Growth**: CPKC anticipates double-digit earnings growth driven by single-digit RTM growth, even with macroeconomic challenges [13][14] - **Pricing Strategy**: The company has been able to maintain pricing above 4% due to the value proposition of its network, which is expected to become even more compelling as truck rates rise [23][24] - **Free Cash Flow**: CPKC is shifting capital priorities towards rolling stock, with a sustainable CapEx target of CAD 2.6 billion to CAD 2.7 billion, supporting a strong free cash flow conversion story [50][51] M&A and Regulatory Environment - **Merger Discussions**: CPKC is preparing for a public debate regarding potential mergers, emphasizing its unique position and the complexities involved in large-scale integrations [60][62] - **Regulatory Challenges**: The company acknowledges the potential for regulatory hurdles in merger approvals, citing historical challenges faced by the industry [66][71] - **Concessions for Mergers**: CPKC is focused on ensuring competitive access in overlapping markets and protecting its competitive niche in key areas [80] Future Opportunities and Challenges - **Market Dynamics**: The company is optimistic about growth opportunities in the North American market, particularly in light of trade rebalancing and the need for supply chain diversification [38][39] - **Operational Complexity**: CPKC recognizes the operational challenges that come with mergers and the importance of careful integration to avoid disruptions [75][78] - **Capacity for Growth**: The company has built latent capacity into its network, positioning itself well for future volume increases as market conditions improve [27][28] Miscellaneous Insights - **Deregulation Impact**: CPKC has made progress in efficiency improvements through deregulation, although some opportunities are still pending [44][46] - **Innovative Solutions**: The company is exploring new products and services, such as the Southeast Mexico Express (SMX), to enhance its offerings and capture additional market share [24][25] This summary encapsulates the key insights from the conference call, highlighting CPKC's operational performance, financial outlook, regulatory environment, and future growth opportunities.

Financial Data and Key Metrics Changes - For Q4 2025, revenue was CAD 3.9 billion, up 1% year-over-year, with an operating ratio of 55.9, reflecting a 120 basis points improvement. Earnings per share (EPS) was CAD 1.33, up 3% compared to the previous year [6][29] - For the full year 2025, revenue reached CAD 15.1 billion, an increase of 4%, with a volume growth of 4%. The operating ratio improved by 140 basis points to 59.9, and core EPS was CAD 4.61, up 8% [7][30] Business Line Data and Key Metrics Changes - In the bulk segment, grain revenues increased by 4% on 2% volume growth, driven by a record Canadian grain harvest of 85 million metric tons, up 20% from the previous year [20][22] - Potash revenues decreased by 2% despite a 2% volume growth, while coal revenue increased by 2% with a 1% decline in volumes [22][23] - The merchandise segment saw energy, chemicals, and plastics revenue down 3% on a 5% volume decline, while forest products revenue declined by 13% on a 12% decrease in volumes [23][24] Market Data and Key Metrics Changes - The intermodal segment experienced a revenue increase of 3% with a 4% volume growth, supported by strong performance from international intermodal volumes [26] - The automotive franchise reported a revenue decline of 3% despite a 1% volume growth, impacted by production slowdowns and supply chain challenges [25] Company Strategy and Development Direction - The company aims for mid-single-digit volume growth in 2026, driven by strong bulk business and unique growth drivers, including record grain harvests [8][10] - Continued investment in capital, including the addition of 100 new locomotives in 2026, is planned to support growth and improve operational efficiency [11][17] - The company is focused on executing its Precision Scheduled Railroading (PSR) model to maintain competitive advantages and improve margins [8][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth outlook for 2026, emphasizing the strength of the grain harvest and the company's ability to control costs and execute its operational model [8][34] - The management acknowledged potential headwinds from macroeconomic conditions and trade policies but remains focused on what can be controlled [34] Other Important Information - The company announced a new 5% share repurchase program for 2026, reflecting confidence in its share price and commitment to returning cash to shareholders [33][34] - The company achieved record safety performance, with a train accident frequency of 0.91, which is 12% better than the previous year [15][16] Q&A Session Summary Question: Volume growth assumptions for 2026 - Management acknowledged challenges in Q1 but expressed confidence in mid-single-digit growth driven by grain and intermodal sectors, with synergies from previous wins contributing to this outlook [38][39] Question: Impact of reciprocal switching proposals - Management indicated that if service quality is maintained, there should be no concern regarding reciprocal switching proposals, emphasizing the importance of providing good service [46][47] Question: Operating ratio potential with mid-single-digit RTM growth - Management discussed the goal of achieving continuous improvement in operating ratio, targeting around 100 basis points improvement per year, supported by strong pricing and volume growth [51][56] Question: Revenue and volume mix for 2026 - Management highlighted potential headwinds in early 2026 due to tariffs and macroeconomic factors but expects stabilization and growth as the year progresses [60][62]

Financial Data and Key Metrics Changes - For Q4 2025, revenue was CAD 3.9 billion, up 1% year-over-year, with an operating ratio of 55.9, reflecting a 120 basis point improvement. Earnings per share (EPS) was CAD 1.33, up 3% from the previous year [6][29] - For the full year 2025, revenue reached CAD 15.1 billion, a 4% increase, with a volume growth of 4%. The operating ratio improved by 140 basis points to 59.9, and core EPS was CAD 4.61, up 8% [7][30] Business Line Data and Key Metrics Changes - In the bulk segment, record grain revenues increased by 4% on 2% volume growth, driven by a record harvest in Canada [20] - Potash revenues decreased by 2% despite a 2% volume growth, while coal revenue increased by 2% despite a 1% decline in volumes [22][23] - The merchandise franchise saw a 3% decline in energy, chemicals, and plastics revenue due to lower volumes, while automotive revenue decreased by 3% despite a 1% volume growth [24][25] - Intermodal revenue increased by 3% on 4% volume growth, with international intermodal volumes up 5% [26] Market Data and Key Metrics Changes - Canadian grain volumes were up 2% due to a record harvest, while U.S. grain volumes also increased by 2% [20] - The North American crop for 2026 is expected to be a record, with estimates of an 85 million metric ton Canadian harvest, up 20% from last year [21] Company Strategy and Development Direction - The company aims for mid-single-digit volume growth in 2026, driven by strength in the bulk business and unique growth drivers [8] - Continued investment in capital, including 100 new locomotives in 2026, supports growth and operational efficiency [11] - The company is focused on executing its Precision Scheduled Railroading (PSR) model to maintain competitive advantages [8][34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving low double-digit earnings growth in 2026, despite macroeconomic uncertainties [34] - The company highlighted its strong operational performance and cost control measures in response to demand softness [28] Other Important Information - The company announced a new 5% share repurchase program for 2026, reflecting its commitment to returning cash to shareholders [34] - The operating team achieved record safety performance, with a train accident frequency of 0.91, which is 12% better than the previous year [15][16] Q&A Session Summary Question: Can you elaborate on the mid-single-digit volume growth assumption? - Management acknowledged challenges in Q1 but expressed optimism about grain volumes and synergies from previous wins contributing to growth [38][39] Question: What are the implications of reciprocal switching proposals? - Management indicated that providing good service mitigates concerns about competition from reciprocal switching, emphasizing the importance of service quality [46][47] Question: How does the company view the operating ratio potential moving forward? - Management aims for continuous improvement in operating ratio, targeting around 100 basis points of improvement per year with strong volume and pricing [51][56] Question: What impact might the harbor maintenance tax exemption have on cross-border volumes? - Management noted that cross-border volume is currently a small part of the business, so changes in the harbor maintenance tax are not a significant concern [77] Question: What are the updated thoughts on M&A and the recent application rejection? - Management reiterated that the rejection highlights the complexity of mergers and the need for factual support for any future applications [81][82]

Financial Data and Key Metrics Changes - For Q4 2025, revenue was CAD 3.9 billion, up 1% year-over-year, with an operating ratio of 55.9, representing a 120 basis points improvement. Earnings per share (EPS) was CAD 1.33, up 3% from the previous year [4][6] - For the full year 2025, revenue reached CAD 15.1 billion, an increase of 4%, with a volume growth of 4%. The operating ratio improved by 140 basis points to 59.9, and core EPS was CAD 4.61, up 8% [5][27] Business Line Data and Key Metrics Changes - Bulk business saw record grain revenues up 4% on 2% volume growth, driven by a record Canadian grain harvest of 85 million metric tons, up 20% from last year [19][20] - Potash revenues decreased by 2% despite 2% volume growth, while coal revenue increased by 2% despite a 1% decline in volumes [20][21] - Merchandise franchise revenues declined by 3% due to a 5% volume decline in energy, chemicals, and plastics, and a 13% decline in forest products revenue due to tariffs [22][23] Market Data and Key Metrics Changes - The intermodal segment experienced a revenue increase of 3% with a 4% volume growth, driven by strong performance from international intermodal volumes [24] - The automotive segment saw a revenue decline of 3% despite a 1% volume growth, impacted by production slowdowns and supply chain challenges [23] Company Strategy and Development Direction - The company aims for mid-single-digit volume growth in 2026, supported by strong bulk business and unique growth drivers, while continuing to execute its Precision Scheduled Railroading (PSR) model [6][10] - A 5% share buyback program was announced for 2026, reflecting the company's commitment to returning cash to shareholders [10][32] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth opportunities in 2026, particularly in grain and intermodal sectors, despite macroeconomic challenges [6][10] - The company is focused on controlling costs and improving operational efficiency, with expectations for low double-digit earnings growth [32] Other Important Information - The company achieved record safety performance and operational metrics, including train speed and locomotive productivity, contributing to its competitive advantage [12][14] - The company is investing in new locomotives, with 100 new units scheduled for delivery in 2026, enhancing fleet efficiency [10][16] Q&A Session Summary Question: Volume growth assumptions for 2026 - Management acknowledged the challenges in Q1 but expressed confidence in grain and bulk business growth, citing strong customer feedback and upcoming opportunities [35][36] Question: Impact of reciprocal switching proposals - Management indicated that if service quality is maintained, reciprocal switching would not pose a significant threat, emphasizing the importance of providing good service [44][45] Question: Operating ratio potential with mid-single-digit RTM growth - Management discussed the potential for continued improvement in operating ratio, aiming for 100 basis points improvement per year if operational efficiencies are maintained [50][54] Question: Revenue bridge from volume to revenue - Management highlighted that while there may be headwinds in early 2026, strong bulk business and tariff impacts would stabilize revenue growth later in the year [58][60]