Canadian Pacific Kansas City 2026 Q3 Earnings Call

Good afternoon, everyone, and thank you for joining us today. Before we begin, I want to remind you this presentation contains forward-looking information. Actual results may differ. The risks, uncertainties, and other factors that could influence actual results are described on slide 2, in the press release, and in the MD&A filed with Canadian and U.S. regulators. This presentation also contains non-GAAP measures outlined on slide 3. With me here today is Keith Creel, our President and Chief Executive Officer; Nadeem Velani, our Executive Vice-President and Chief Financial Officer; John Brooks, our Executive Vice-President and Chief Marketing Officer; and Mark Redd, our Executive Vice-President and Chief Operating Officer. The formal remarks will be followed by Q&A. In the interest of time, we would appreciate if you limit your questions to one.

It is now my pleasure to introduce our President and CEO, Mr. Keith Creel.

Thanks, Chris, and good afternoon, ladies and gentlemen. Thank you for joining us on the call today. First and foremost, I want to extend a heartfelt thank you to our 20,000-strong family of railroaders across the three countries that produced the results our team has the honor of discussing today. We are extremely proud of what this team has delivered during this quarter, handling strong growth, running the railroad extremely well, and continuing to create opportunities across this very unique network. Looking at the quarter on the results side, we delivered third-quarter revenues of CAD 4.2 billion, volume growth of 6%, an operating ratio of 61.9 that generated 16% adjusted EPS growth. Against a pretty dynamic backdrop, I am pleased with what the team has delivered. We handled 6% more volume while continuing to improve the performance of the railroad. More importantly, there is so much more opportunity in front of us.

On the car velocity, train velocity, fuel efficiency, terminal fluidity all showed strong improvement year-over-year in operations. This credit belongs to Mark, the senior team, and the railroaders across our network executing our plan every day. Nick Walker, Greg Squires, Jason Ross, Brad Robertson, Baden Tidd, Tom Bourgonje continue to provide strong leadership. I will tell you, we are fortunate to have a deep experience and talented bench of operating leaders across this network. We have invested ahead of growth. We have got the people, the locomotives, and the infrastructure aligned with our demand. We are prepared to grow, and we are becoming better railroaders each and every day. Operational excellence is a journey. It is not a destination. There is more opportunity to be mined, and rest assured, I am confident this team will continue to find it.

On the commercial side, John and his team continued to convert the reach and the opportunities this network creates into new markets, new products, and profitable, sustainable growth during the quarter. We established all-time volume records in domestic intermodal, international intermodal, and U.S. grains. These outcomes reflect strong service, discipline in the market, and the unique options this network creates for our customers. We also announced a meaningful expansion of our relationship with Elk Valley Resources to move their product from the mines that we serve in southeastern British Columbia to Vancouver for global export. This expanded agreement reduces complexity, strengthens end-to-end supply chain, and positions CPKC and EVR to grow together for years to come. Our Canada-Mexico land bridge is another powerful proof point which continues to generate value in the face of uncertainty.

When we brought these two railroads together just over three years ago, this traffic was about CAD 100 million in annual revenue. We expect to exit this year north of CAD 600 million. This is not growth we inherited. It is growth that we created, taking a challenge and turning that challenge into an opportunity, creating new markets enabled by this unique North American network. Importantly, we delivered 6% volume growth despite headwinds across certain markets during the quarter. That tells you something about the quality and the diversity of our growth opportunities as we remain well on track for another year of mid-single-digit volume growth. It also speaks to the alignment between our operating and commercial teams. The operating team delivers the service. The commercial team takes the service to the marketplace and creates opportunities.

They have been doing it consistently since we brought these two networks together over three and a half years ago. The bottom line, when you combine industry-leading operations, a unique network built for growth, and a hungry, disciplined commercial team, you create a very compelling outcome. Let me leave you with this. The larger message has not changed. We have a railroad that is running extremely well, a differentiated network, a deep pipeline of growth opportunities that are in front of us. I am proud of what the team has delivered in this quarter, but rest assured, we are not satisfied. We know there is more work to do and, more importantly, opportunity to capture. The team will remain focused on execution, taking care of our customers, converting these opportunities into profitable, sustainable growth.

With that, I will turn it over to Mark to walk through the operation, John to give you some color on the markets, and Nadeem will close it out before our questions, elaborating on those numbers. So over to you, Mark.

Yeah. So thank you, Keith, and good afternoon. I want to begin by thanking our railroaders for another strong quarter of execution. Our network is running very well, delivering reliable service for our customers while supporting continued growth across the business. We saw strong improvement across several of our operating metrics. Train speed improved 8%. Dwell improved 7%, car miles per car day increased 10%, locomotive productivity up 4%, fuel efficiency improved 3%.

These results demonstrate the strength of our PSR operating model. In review of the safety results, our personal injury frequency was 1.12, which is 20% higher than last year. Our train accidents improved 60% to 0.46. While we are pleased with the train accident result, the increase of personal injuries does not meet our standard. Safety is a never-ending journey. We will learn from every incident, reinforce the fundamentals, stay focused on what matters most, every railroader going home safe at each and every shift. Turning to labor, in the U.S., we reached agreements that bring employees from several separate agreements under our Mid-South agreement. This simplifies how we operate, provides greater flexibility, helps us run a more consistent, reliable service for our customers.

I am also pleased to announce that we have two new collective agreements with BLET, SMART, have been ratified on the DM&E and Soo Line properties. In Canada, CPKC and the IBEW agreed to binding arbitration, ending the strike involving approximately 300 signal to communications employees. Turning to capital, we continue to make disciplined investments in safety, growth, and efficiency. We have received 170 of the Tier 4 locomotives from Wabtec. We are beginning to receive 35 more from Progress Rail. In total, we expect to bring on 300 new locomotives through 2028. We are already seeing benefits in these investments. The newer locomotives have contributed to more than 35% reduction in our service interruptions on our 100 Series trains in Canada. A 10% reduction in interruptions in our Western Canadian grain fleet while improving fuel efficiency on both services.

We are strengthening the tools our service design team uses to plan and operate the railroad. We recently moved into the new planning platform that gives the team near real-time visibility into traffic and network conditions, along with the greater control of the data and the models used to build the operating plan. This in-house tool replaces a legacy third-party application. That visibility allows us to evaluate operating scenarios faster, responding to changing traffic patterns sooner, refine the plan as conditions change. This is what disciplined PSR execution looks like. Better information, quicker decisions, and even more tighter alignment between the operating plan, our resources, and customer demand. In closing, I am proud the way the railroad has continued to execute across the network. This railroad is running well. We are building on that strong foundation with disciplined investments in our people, capacity, equipment, and technology.

Together with our PSR model, these investments are improving reliability, creating capacity, positioning us to safely handle John's and his team's growth. We are never satisfied and we will keep controlling what we can control, keep our foot on the gas, and continue making this railroad better every day. With that, I will turn to John.