CP — Canadian Pacific Kansas City Ltd.

Summary of CPKC Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 Revenue: $3.9 billion, up 1% year-over-year.
• Operating Ratio: 55.9%, improved by 120 basis points.
• Earnings Per Share (EPS): $1.33, up 3% year-over-year.
• Full-Year Revenue: $15.1 billion, up 4%.
• Full-Year Operating Ratio: 59.9%, improved by 140 basis points.
• Core EPS for Full Year: $4.61, up 8%.
• Net Cash from Operating Activities: $5.3 billion, up 1%.
• Capital Expenditures (CapEx): $3.1 billion, above the $2.9 billion outlook.

2. Strategic Updates and Business Highlights

• Operational Excellence: Achieved record metrics in train weight, speed, and productivity. Maintained a strong safety performance with a 0.91 FRA train accident frequency.
• Growth Drivers: Anticipated strong growth in grain transportation due to record harvests in Canada (85 million metric tons) and the U.S. Continued expansion in intermodal services, particularly with new partnerships and offerings.
• Investment Plans: Announced a 5% share buyback program for 2026 and plans to acquire 100 new locomotives to support growth.
• Labor Relations: Ratified 16 collective bargaining agreements covering 700 employees, enhancing service reliability.

3. Forward Guidance and Outlook

• 2026 Expectations: Projecting mid-single-digit volume growth and low double-digit earnings growth, driven by unique growth opportunities in bulk and intermodal segments.
• Operating Ratio Improvement: Aiming for continued improvement in operating ratios, with expectations of 100 basis points improvement annually.
• Market Conditions: The outlook does not heavily rely on macroeconomic improvements but focuses on internal growth drivers.

4. Bad News, Challenges, or Points of Concern

• Demand Softening: Noted demand softening in several areas, particularly in the automotive and forest products segments, with tariffs impacting revenue.
• Weather Impact: Adverse weather conditions affected grain loading and shipment volumes, particularly in Q4.
• Tariff Environment: Ongoing uncertainty regarding tariffs and trade policies, particularly with USMCA negotiations, poses risks to cross-border volumes.
• Q1 Challenges: Anticipated to be the toughest quarter of the year due to tough year-over-year comparisons and potential weather disruptions.

5. Notable Q&A Insights

• Volume Growth Confidence: Management expressed optimism about achieving mid-single-digit volume growth despite recent weather challenges, citing strong grain and intermodal growth prospects.
• Reciprocal Switching Concerns: CEO Keith Creel discussed the implications of proposed reciprocal switching regulations, emphasizing the importance of service quality and competition.
• Synergy Targets: The company is on track to achieve an additional $200 million in synergies, bringing the total to $1.4 billion by the end of 2026.
• Impact of USMCA: Creel noted that while the renegotiation of USMCA could introduce risks, it also presents opportunities for trade growth, particularly through CPKC's unique network.

Overall, CPKC demonstrated resilience in its operational performance amidst challenges, with a strong focus on strategic growth initiatives and maintaining a disciplined approach to cost management.