CP — Canadian Pacific Kansas City Ltd.

Summary of CP's Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• Revenues: $3.7 billion, reflecting a 2% volume growth on a Revenue Ton Mile (RTM) basis.
• Operating Ratio: 63% (core adjusted), with a reported operating ratio of 66%.
• Earnings Per Share (EPS): $1.04 (core adjusted), down 2% year-over-year, impacted by foreign exchange and fuel price changes.
• Cash Flow: Strong cash flow generation, with $680 million deployed in share repurchases and a 17.5% increase in the quarterly dividend.

2. Strategic Updates and Business Highlights

• Operational Performance: The network achieved record operational results, with improvements in productivity, velocity, and asset utilization since the merger.
• Labor Agreements: Long-term tentative agreements reached with SMART-TD and BLET unions, enhancing labor stability and quality of life for employees.
• Volume Growth: Significant contributions from grain shipments, automotive, intermodal, and MMX services, with record grain volumes supported by a strong harvest.
• New Initiatives: Launch of the SMX service expected to enhance intermodal offerings and drive truck-to-rail conversions.

3. Forward Guidance and Outlook

• Q2 Expectations: Anticipating strong performance with record volumes in April and a positive inflection in yields as comparisons normalize.
• Full-Year Guidance: Confident in achieving double-digit EPS growth in Q2 and the second half of the year, supported by improved operational efficiencies and market conditions.
• Capital Expenditures: Planned CapEx of $2.65 billion for the year, a 15% reduction from the previous year, focusing on productivity improvements.

4. Bad News, Challenges, or Points of Concern

• Coal Business Decline: Coal revenues down 11% due to production issues at customer mines, expected to continue impacting Q2 and full-year results.
• Mixed Performance in Merchandise: Declines in energy, chemicals, plastics, and forest products due to tariffs and macroeconomic factors.
• Foreign Exchange and Fuel Price Headwinds: Notable impacts on yield and overall financial performance, with expectations of continued volatility in these areas.
• Regulatory Risks: Concerns regarding potential mergers in the industry, with opposition from various stakeholders, including shippers and labor groups.

5. Notable Q&A Insights

• Customer Sentiment: Positive feedback from customers regarding volume growth outside of coal, with expectations for continued strength in grain and automotive sectors.
• Intermodal Growth: The SMX service is expected to significantly enhance intermodal capabilities and attract truck-to-rail conversions.
• Fuel Surcharge Dynamics: Anticipated improvements in EPS as fuel surcharges adjust to higher prices, mitigating previous headwinds.
• Merger Concerns: Keith Creel expressed strong opposition to potential mergers in the industry, emphasizing the risks to competition and service reliability.

Overall, CP reported a solid start to 2026, with strong operational performance and strategic initiatives in place, despite facing challenges in specific segments and external market pressures. The outlook remains positive, with expectations for growth and improved financial metrics in the coming quarters.