Canadian Pacific Kansas City (NYSE:CP) 2026 Conference Transcript

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.