Canadian Pacific Kansas City Third Quarter 2026 Earnings - CANADIAN PACIFIC KANSAS CITY LTD

Good afternoon, everyone. My name is Beau, and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC's third quarter 2026 conference call. The slides accompanying today's call are available at investor.cpkcr.com. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like a question at that time, simply press star, then the number one on your telephone keypad. if you would like to withdraw your question press star 2. i would now like to introduce mr chris de brun vice president capital markets tax and treasurer please go ahead sir thank you bo 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 two in the press release and in the mdna filed with canadian and u.s regulators this presentation also contains non-gap measures outlined on slide three with me here today is keith creel our president and chief executive officer nadeem balani our executive vice president and Chief Financial Officer John Brooks our executive Vice President 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 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're 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 $4.2 billion, volume growth of 6%, an operating ratio of 61.9 that generated 16% adjusted EPS growth. It gets a pretty dynamic backdrop. I'm pleased with what the team has delivered. We handled 6% more volume while continuing to improve the performance of the railroad. And 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. And this credit belongs to Mark, the senior team, and the roaders across our network executing our plan every day. Nick Walker, Greg Squires, Jason Ross, Brad Robertson, Braden Tidd, Tom Burgonier continue to provide strong leadership. And I'll tell you, we're fortunate to have a deep experience and talented bench of operating leaders across this network. We've invested ahead of growth. We've got the people, the locomotives, and the infrastructure aligned with our demand. We're prepared to grow, and we're becoming better railroaders each and every day. Operational excellence is a journey. It's not a destination. There's more opportunity to be mined, and rest assured, I'm confident this team will continue to find it. On the commercial side, John and his team continue 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 intermodals, 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 Indian 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 $100 million in annual revenue. We expect exit this year north of $600 million, and this is not growth we inherited. It's growth that we created, taking a challenge and turning that challenge into an opportunity, creating new markets enabled by this unique North American network. And importantly, we delivered 6 percent 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've been doing it consistently since we brought these two networks together over three and a half years ago. So 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. So let me leave you with this. The larger message has not changed. We have a railroad that's running extremely well, a differentiated network, a deep pipeline of growth opportunities that are in front of us. I'm proud of what the team has delivered in this quarter, but rest assured, we are not satisfied. We know there's 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. And with that, I'll turn it over to Mark to walk through the operation. John, I'm going to give you some color on the markets, and Nadim, we'll close it up 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 percent. Dwell improved 7 percent. Car miles per car day increased 10 percent. Locomotive productivity up 4 percent. Fuel efficiency improved 3 percent. These results demonstrate the strength of our PSR operating model. The review of the safety results, our personal injury frequency was 1.12, which is 20% higher than last year. Our train accident improved 60% to 0.46, but we are pleased with the train accident result. The increase of the personal injuries does not meet our standard. Safety is a never-ending journey. We will learn from every incident, reduce the fundamentals or reinforce the fundamentals, stay focused on what matters most. railroad are going home safe at each and every shift turning labor in the u.s we reached agreements that bring employees from several separate agreements under our midsouth agreement that simplifies how we operate provides greater flexibility helps us run a more consistent reliable service for our customers i'm also pleased to allow announce that we have two new collective agreements with BLAT, SMART, have been ratified on the DME and Sioux Line properties. In Canada, CPKC and the IBEW agreed to binding arbitration, ending the strike involving approximately 300 signal and communications employees. Turning to capital, we continue to make disciplined investments in safety, growth, and efficiency. We have received 170 of the Tier four locomotives from Wabtec, we're beginning to receive 35 more from Progress Rail. In total, we expect to bring on 300 new locomotors through 2028. We're already seeing benefits in these investments. The newer locomotions 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 of our service design team using the plan and operate the railroad. We recently moved into the new planning platform that gives the team near real-time visibility in the 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 the 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'm proud of the way the railroad has continued to execute across the network. This railroad is running well. We're beginning, we're 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. never satisfied when we keep controlling what we can control keep our foot on the gas and continue making this railroad better every day but that'll turn it john all right thank you mark and good afternoon the cpkc team in this unique network produced another record quarter driven by strong operating and commercial execution we delivered record q3 freight revenues and rtms of 15 and 6 respectively cents per rtm increased nine percent reflecting sustained pricing strength and higher fuel surcharge revenue our capacity and reliable service support new business initiatives and share gains while discipline pricing remains a core focus moving on to the next slide i want to highlight the consistency of our industry leading growth we have delivered consistent rtn growth across our three-nation network with year-to-date q3 volumes x coal up 17 since the merger that performance despite a tough macro backdrop is driven by disciplined commercial execution self-help initiatives and strategic share gains and our strong service product network fluidity and available capacity provide the foundation for this growth. Now, taking a closer look at our third quarter revenue performance, I'll speak to the FX adjusted results. Starting with bulk, Q3 was another record quarter for grain with record revenue, RTMs, and carloads. Revenue increased 27% on 23% volume growth. Canadian grain volumes increased 35%, driven by a high carryout of stocks following the record harvest, growth into our Mexico market, and strong Vancouver exports. U.S. grain volumes decreased 13%, drivenby strong corn demand into Mexico and exports through the PNW. Now, looking ahead, we expect continued grain volume growth through the end of the year and into early 2027, supported by healthy supply and demand fundamentals combined with our diverse market reach. We are also very encouraged by new crush production coming online in both Canada and the U.S., including our new contract with LDC at Yorkton. Potash revenues were up 8% on a 7% decline in volume, with performance reflecting the impact of CampaTexas Portland Terminal Maintenance during the quarter. Now looking ahead, export demand fundamentals remain healthy and Portland's maintenance is now completed. We expect a return to solid growth for the remainder of the year. To round out bulk, coal revenue declined 1% and 11% reduction in volume. The decrease continued to reflect production-related challenges at the mines. However, as expected, this volume headwind is continuing to moderate. And more importantly, as Keith mentioned, I'm very excited about our new five-year contract with EVR. This agreement establishes a strategic long-term partnership for CPKC and EVR, resetting to what good service looks like for our Canadian coal franchise. And moving on to merchandise, energy, chemicals, and plastics revenue increased 9% on flat RTMs. Higher energy prices have shifted some of our commodity flows into shorter-haul domestic and export markets, creating a headwind versus our expectations on the quarter. As energy prices moderate over time, we expect those trade flows to normalize. At the same time, I can tell you this team remains laser-focused on controlling what we can control and that's winning new business and pursuing self-help opportunities that only set us up well as we go to 2027. Forest products revenue increased nine percent on a two percent volume growth. We delivered solid and resilient growth in this space despite softness in housing and cross-border tariffs. Our focus on industrial development opportunities supports growth against the softer macro backdrop. The metals, minerals, and consumer products area revenue increased 13% on 8% volume growth. We continue to deliver growth and record quarterly volumes in steel, aluminum, and metal, supported by good demand from industrial production and construction activity. Moving to the automotive area, revenue increased 5% on a 5% volume decline. While the quarter was significantly impacted by plant retooling and production holds, we remain confident in the long-term growth outlook for our automotive franchise. We have line of sight to return volume growth for the fourth quarter and into 2027, been supported by shared opportunities and the conversion of short-sea traffic to rail. Now, closing with intermodal, revenue increased 21% on a 10% volume growth and all-time record performance. Domestic intermodial volumes increased 7% in the quarter. Growth was supported by strong performance across our Canadian domestic lanes, along with continued strength in our U.S. lanes and mexico cross-border service our smx product with csx continues to build momentum with volumes up 30 percent sequentially our service reliability on both our mmx and smx intermodal products position us well to continue to build trust with our customers and capitalize on favorable truck the rail conversion opportunities In International Intermodal, volumes increased 11% driven by continued strength in shipments from the Port of Vancouver for Gemini and also CMA. Our capacity at both the ports and inland terminals support reliable service and sustainable profitable growth. We are particularly excited about the recent federal funding announcement for the Port of St. John's, including significant investments in the port, water access, warehousing, and rail efficiency. This nearly $500 million investment will unlock capacity to handle up to a million TEUs of capacity and support growth through this premier gateway for years to come. So to close, the growth we are delivering is differentiated and sustainable. It is supported by strong service, disciplined pricing, and an expanding pipeline of self-help opportunities that are unlocked by this unique network. We are well positioned for a strong finish to the year, and I remain confident in our ability to carry this momentum into 2027 and beyond. So with that, I'll pass it over to Nadim. Okay, great. Thanks, John, and good afternoon. I'm pleased with the solid results the team delivered this quarter. Strong volume growth, disciplined pricing, and continued productivity gains drove 16% growth in core adjusted diluted EPS, despite the margin pressure from higher fuel prices. Now, turning to our third quarter on slide 15, CPKC's reported operating ratio was 64.8%, our core adjusted OR was 61.9%, up 120 basis points from last year. Deluded earnings per share was $1.04 and core adjusted diluted EPS was $128, up 16% versus last year. Taking a closer look at our expenses on slide 16, I will speak to the year-over-year variances on an FX adjusted basis. Core adjusted comp and benefits expense was $708 million. The year- over-year increase was driven by higher stock base and incentive compensation, wage inflation and volume related expense. These increases were partially offset by strong productivity gains, including lower overtime and workforce efficiencies. Looking ahead, we now expect full-year headcount to be down slightly. This combined with mid-single-digit volume growth continues to drive strong labor productivity and operating leverage. Fuel expense was up 56% year-over-year, driven by a 53% increase in average fuel price as well as higher volumes. The change in fuel price was a 190 base point headwind to core adjusted OR in the quarter while providing a modest benefit to earnings. Our continued focus on fuel efficiency supported by our locomotive investments drove a 3% improvement in the order and generated $21 million in savings. Materials expense was up 12% year-over-year driven primarily by higher fuel prices on our non-locomotive fleet. Poor locomotive material costs partially offset the increase. Equipment rents were 9% lower versus prior year as improved network performance and cycle times more than offset the impact of increased volumes. Depreciation and amortization expense was up 4% driven by a larger asset base. Core adjusted PS&O expense was $568 million. The year-over-year increase reflected inflation, volume growth and other operating costs partially offset by lower casualty costs and productivity gains, including lower crew and terminal costs. Overall, I'm pleased with the operating leverage we delivered in the quarter. Volume growth, disciplined pricing, and continued productivity improvements drove double-digit earnings growth despite higher fuel prices creating pressure on the operating ratio. Moving below the line on slide 17, net interest expense was $239 million, or $235 million excluding purchase accounting. The increase was driven primarily by interest on new debt, partially offset by debt repayments. Income tax expense was $448 million or $369 million adjusted for purchase accounting and significant items. We continue to expect a full year core adjusted effective tax rate of approximately 24.75%. Turning to slide 18 and cash flow, our earnings growth continues to translate into strong cash generation. Year-to-date net cash provided by operating activities is up 12%, while adjusted free cash flow increased 59% to $2.4 billion. Year- to-date capital expenditures were $2 billion, down 12% from last year, and we remain on track to deliver full-year capex of approximately $2,65 billion, a 15% reduction versus last year. Our targeted investments over the last several years in network capacity and locomotives are delivering tangible benefits, as demonstrated by our operating productivity and fuel efficiency performance. Through the first three quarters of the year, our disciplined approach to capital management delivered over $4 billion of shareholder returns through share repurchases and dividends, reflecting a balanced and opportunistic allocation of capital. Stepping back, I'm pleased with the overall performance in the quarter. We've delivered strong earnings growth and cash generation while continuing to improve productivity across the business. As we move into the fourth quarter, we remain focused on execution, and we're very well positioned to deliver on our full-year guidance. With that, let me turn it back over to Keith. Okay, thank you, gentlemen. Operator, if you could, let's open it up for questions. Certainly, Mr. Creel. Thank you. Ladies and gentlemen, at this time, if we do have any questions, please press star, then the number one on your telephone keypad. If you do find your question has been addressed, you can withdraw your question by pressing star 2. As previously highlighted, please limit yourself to one question. We'll go first this afternoon to Steve Hansen with Raymond James. Yeah, good afternoon, guys. Thanks for the time. Keith, I'm hoping you provide a little more color on this new Elk Valley agreement, your additional or higher share of the haulage, and just what kind of growth you might contemplate through the new term. It does sound like service and the route simplicity played a role here. I'm curious if the investment announcements in NFT also played a role recently. Thanks. Yeah, Steve, thanks for the question. Just in context, if you go back to the last contract, I guess, with our competitor, Canadian National, historically before that contract, CP originates 100% of this coal and terminated 100%of the coal, kind of from the mine to the tidewater. Now, the stuff going to the North Shore, CN acts as our agent as they do for potash as they do for grain. Well, this last contract, CN and back then, I guess it would have been Tech Coal, introduced an interchange at Kamloops, which you have 100% of the traffic we originate that some interchange to CN at Canadian National to go to those same locations at Tidewater in Vancouver. And I think we all understand every time you introduce a handoff, indoor interchange, you create complexity and an opportunity for introducing supply chain cost, indoor compromising reliability. And I would suggest over the period of that contract, that has happened in small or large part to a point that in our negotiations, that became a topical point. So what's happening now is about half of the traffic that today interchanges to our competitor at Kamloops to go to the north shore of Vancouver will be reclaimed back to CP, origin to destination, and the interchange at Kamlaops will be eliminated for that traffic. So about a train and a half will flip back to CPE's route, Cradle to Grave. We'll go next, Matt, to Brian Offenbeck with J.P. Morgan. Brian Offendbeck, J. P. Morgan, M.D.: Hey, Afton. Thanks for taking the question. Maybe just a big picture question for John. Just how you're thinking about the pricing opportunity going forward and balancing that with volume growth and, of course, network resources i would assume there's some inflation you're expecting to cover but in terms of just the broader truckload market and all support that we would see from the market itself should we expect something a little bit better than usual um when we think about just kind of the run rate maybe about mid single digits and of course probably an impact from the canadian green being lagged with a fuel surcharge so i would appreciate some comments on that thanks yeah so So, Brian, you know what, I'm bullish on the pricing outlook. You know, we've got, it's been a pretty good run, and I think you've seen our commercial team be extremely disciplined in the marketplace. That's not going to change. I'll just be candid. You know renewals continue to be that 3% to 4% or even more in some cases. So I don't see that changing. We're going to stay aggressive on that front. You know, obviously fuel surcharge, where it's at in the marketplace, kind of has introduced another dynamic that we're keeping an eye on and making sure that we'RE competing in the markets like we need to be. But I continue to have a pretty favorable outlook to close out this year. You know most of our book is already pretty much renewed, But I've got a favorable outlook as we look into the beginning of 2027. Thank you. We'll go next now to Fadi Shamoon with BMO Capital Markets. Yes, good evening. You talked about the deep pipeline and growth going forward. i was hoping you can elaborate on kind of what verticals where what do you see uh share with us some some thoughts on where these opportunities are as you go kind of over the next 12 24 months and and any uh kind of high level idea on how to think about rpm growth in 2027 given this kind of the pipeline and now you have a bit of a visibility into the grain and the cold story i guess going into next year how do you see things shake out from and off the end goals next year fed i don't think they're gonna they're going to let me quite uh guide to 27 yet but i will give you some color um you know certainly we've had a really good bulk year um this year so those compares are are going to be tougher as you look at 2027 but i'll tell you i'm still still pretty bullish that we have not rung out all the opportunity specific to this grain franchise we continue to uncover more and more opportunities into the southern part of our network and growth into mexico and driving efficiency there so you know despite what i i do see is is tougher comps in in that space um i'm convinced we we have some upside in there this this crush market in the development of of that business not only in canada uh but also in in the u.s um has has been pretty good and it really diversifies um our our grain business and and those crushers gotta crush 365 days a year they're a production facility uh so that's that's really good business and i i think that's an area that you should look to as as some upside you know keith mentioned the the land bridge earlier um there's uh i spent uh here the last few weeks in in mexico meeting with customers and that then that area only continues to build momentum and that's just that's both car load type business um and and steel products and and paper products but it's you know it's uh intermodal opportunities and and that too so i i expect to build on that that land bridge You know, I would suggest to you that we're also in the early innings of this domestic and remodeled story. I remain bullish on our team's ability to convert truck opportunities. You know I've talked about we've got a hunter group in Mexico that is keenly focused on uncovering those opportunities and converting new customers. And we're working close with CSX on our SMX product that only provides further upside. And, you know, we've posted really good international numbers this year on some wins. But between the opportunity and the investment that's going to go in at St. John, there's a lot of upside there. And we continue to see, albeit singles and doubles, we continue to see growth at Lazaro. And who knows? As you see, you know, the canal has had some challenges here on water levels. You could have a potential west coast U.S. strike with the longshoremen in 2027. We continue to be pretty bullish on Lazaro also in terms of growth. So that's a few nuggets that are out there, you know, let alone some of the other things that we have coming down the pipeline. Yeah, John, if I could add that point about the strike in the West Coast, I think we all understand the complexity of how that might develop. And what's true now that wasn't true the last time is we have a viable, reliable route from Lazaro into the Houston markets and into the Midwest that shippers did not have a chance or an opportunity to diversify their risk relative to that strike. And I would suggest that will be part of the playbook. And once you get some of that traffic on your railroad, they experience the service, they experienced the reliability. It may not all stick, but from diversification play, we realized our experience to some of it will. And that bodes well to our growth aspiration. One comment I'd make is just also just staying in front of john with capacity i know we are lockstep but different things that he's doing uh business he's bringing on this right road so we certainly got locomotives in place resources in place for crews and certainly better agreements that i spoke about that we can move people around in around that southern part of u.s uh shreveport area for sure i appreciate it thanks thank you we'll go next now to jonathan chapel with evercore isi thank you guys uh good afternoon um john i know they won't let you talk about the 27 rtms but maybe as it relates to the fourth quarter you're running at about five and a half percent you spoke about a lot of favorable things uh in your favor right now from auto to potash etc and then you also should still have some carryout i would think from the grain side so um how do you think about momentum for the rest of the quarter given some of those things that seem to be shifting uh potentially from headwinds to tailwinds yeah jonathan's gas on um we're we're we're going to push it as hard hard as we can and and i and i think there's a look the the markets are not perfect there's there's ups and downs and we we've got some headaches that that are out there but but we're gonna push it hard and and to your point um you know as i think about the bulk area today to close out the year, I think it looks pretty good. Domestic intermodal, our international business, I, I thing looks pretty good. You know, we've had a little bit of a rough go in the automotive sector here. But we also, you know, had the chip issues and that in November, December last year. compares uh will turn for us um in in in those months and i'm super proud of my merchandise team that's an area that has just been strapped with tariffs and issues and ups ups and downs and we've you've seen the numbers we've continued to battle in forest products and in in the merchandise sector to pose some pretty good numbers there so um i'm not going to give you a number but i you know i'm i'm optimistic that we can we can close pretty strong Thank you. We'll go next now to Ken Hexter with Bank of America. Hey, great. Good afternoon. Maybe I know you've talked a lot about maybe capturing some of the good grain crop or I guess continuing it, but I don't think we got your expectation for next year in terms of do you expect it to be down 5%, 10% given the crop or do you make that up? And then maybe just your thoughts on capacity. You know, you talked about buying locomotives and getting them on board. Where do you feel like you are in terms of this mid-to-upper single-digit RTM growth in terms OF your ability to sustain that? Or, you know, should we expect a rise in CapEx in the 27? Thanks. Can I let John address the commercial question? When it comes to capacity, I'll just remind everyone, we made a commitment to the STB with our transaction to build out this network to handle high single-digit RTM growth. We haven't experienced that yet, but we've invested the capital. The infrastructure's there. We've got the locomotives. We got the cars. We get the terminal and the track capacity. We'll get a new bridge. We're built forward for growth. There'll be no issues with us adjusting our capital envelope. Yeah, Ken, I mean, we're going to finish the year, as I mentioned, $2.65 billion this year. We might get a modest increase off that given uh where the canadian dollar is but but outside of that uh we we've guided long-term 2.6 to 2.8 billion range of capex so you should expect that that range yeah ken i it's no doubt this is we're coming off a record crop um i think the numbers are bouncing around still a little bit um it feels like it's narrowing in on the 76 to 78 million metric ton area so what would that that be down i don't know about eight percent or so um but that being said um i know there's some growing territory in southern alberta and southern saskatchewan that historically we've had struggles the last few years in terms of drought and that that are actually producing much better results this year um so we're optimistic actually in our growing territory that we in some areas we might actually be a little little ahead of last year um so we'll see what that all produces is is it going to the next year um you know i i would say so far the the customers are signaling you know sold out demand uh pretty much through the end of this year and i think the early outlook on on q1 is they remain fairly bullish so we will see how that plays out great thanks guys appreciate the thoughts yeah we'll go next now to walter spracklin with rbc capital markets yeah thanks very much uh operator good afternoon everyone i just wanted to come back to your uh health valley uh resources agreement there and congratulations on that uh the question i have is really for how we model that now with all the moving parts that we saw this year with with with the the outage at the mine level and now you're recapturing half of what you lost to cnb4 it just makes it really difficult to look out to next year and and put a number on on on what we should look at next year i know that if we just go back to last the last year's numbers you're up you know that brings you up 15 20 but now later on this business are we looking north of are we getting in that 20 range for what you could be up year over year in in the coal set just any any kind of given the moving parts there would be i really appreciate any uh any guidance you can provide on that uh that particular vertical yeah so walter it's a tricky one there is a lot of moving parts uh there you know um i think elf valley has been been pretty transparent around some of the challenges at at the mines um that being said the performance certainly has been been much better and we're we're watching it closely as we move through q4 here um you know i think um you know if you look at year over year their their volumes overall probably gonna end up 15 plus down um in terms of of tonnage um and and honestly it's it's kind of early in terms of what they're looking towards 2027 is when we have a better handle on on what 2027 looks like in in terms of their total tonnage output i that's that'll give us a a better look i apologize for skating around it a little bit um but we we're it's still the crystal ball still a little cloudy on on our side i think the bottom line is we feel really good about where we stand with them in terms of this additional train train and a half to neptune in addition as you've seen they've signed a long-term agreement with west shore which is right in our in our wheelhouse too and we expect some good growth there so the combination of the two um lines up for a good growth story we just got to get nailed down exactly what this tonnage is going to look like for next year. Thank you. We'll go next now to Chris Weatherby with Wells Fargo. Hey, thanks. Good afternoon, guys. I thought slide 10 was helpful in terms of putting some perspective on what you guys have been able to accomplish since you closed the deal a few years ago. I guess as you think about where you stand now and the opportunities sort of in front of you, I know it's been a challenging, sort of maybe a more challenging macro than you might have expected when you closed the deal, but you guys have obviously executed well through this. So do we still think about sort of a two- to three-point sort of revenue premium or volume premium for the deal? I don't know if we can talk a little bit about that. And I know the farther we get away from it, the more difficult it is probably to pull these two apart. But any big-picture perspectives, Keith or John, on how you guys are thinking about that as we look out to 27-28? i can tell you the expectation in in the room is uh yeah we're gonna we're going to beat by one to two points uh can consistently and and honestly as much as um i'm i'm proud of our success and what we've been able to produce you said it it's been uh in the face of a pretty tough macro environment and who knows i've i've stopped guessing on you know when that may turn or turn or not turn um but you know at some point things will get favorable i think that gives us a tail in and you can rest assured chris that i think you know we're gonna we're going to continue to push hard and and um and and there's a lot of opportunities that that i mentioned earlier that i i still think produce and have the opportunity to produce for the next few years sort of an outweighed, you know, RTM performance against the industry or our peers. Thank you. We'll go next now to Benoit Poirier at Desjardins. Yeah, good afternoon, everyone. So just in terms of the nation-building project, we've seen quite a lot of positive news flow going forward in terms of energy mining we also saw a latest announcement from the strata kona resources on crude by rail so i was just wondering if you could provide maybe john or keith an update how we you you see energy uh performing going forward and if you would be able to to quantify any uh potential upside from those uh nation building projects uh longer term for uh cpkc thank you yeah you know as i think about some some of those projects obviously we're we're tightly um you know working with major projects office on on a number of opportunities that are out there um i you know i think there's pretty good alignment in terms of you know what some redevelopment could look like in vancouver and particularly the south shore as it relates to energy um you know i think it's a little early to tell you can probably guess what some of those those projects might be but i think a little earlier to tell on on how that plays out um you know I tell you I mentioned it earlier and maybe it doesn't fit directly in in the energy sector. We're super excited about basically the first project coming out of this trade diversification corridor fund being all centered on St. John. I think it's a testament to that acquisition that we made a few years back of the short line. It's a Testament to the Irving's belief in, in that opportunity in the port and DP world and, and Hapag and Marist and CMA and those steamship lines that have supported that port um i can tell you it's it's a big part of our growth profile as you looked at you know let's say 2027 to 2030 okay that's right thank you very much john yes we'll go next now to brandon oglenski at barclays hi good afternoon and uh thanks for taking the question and i apologize in advance to everyone on the call because i'm going to be that guy and ask about M&A, Keith, because I think you have, you know, filed your responsive requests, you know, last month, and obviously your competitors did that as well. And I know you think this should be rejected on the merits, but, you know, can you speak to what was in those requests, and then maybe more specifically on the comments that we heard from Closter as well? Thank you. Thanks for the question, Brandon. First, let me say this. CPKC in our initial filing, and you'll see in our subsequent filing, November the 18th, we're not asking Santa Claus to visit us on Christmas. I can tell you that. We're being very strategic. We'RE being very pinpointed. WeRE being very surgical, asking for, number one, complete rejection. We don't want a condition. We don'T want a concession. We don' t think it's needed. We don'' t think UP needs it. We don '' t think NS needs it in spite of this narrative that the nation needs it to create something that represents that much risk, that much market power forever. It's completely unneeded and unnecessary. Not now, and I say not ever. That being said, if the STB finds a way to approving their deal, and And I think you clearly understand I don't believe the facts lead to a yes. That being said, what you're going to see in our filing, again, not a Santa Claus list, but protections over gateways that are meaningful, that to this point the applicants have not offered, shipper access to protect competitive alternatives to mitigate the market power that something as colossal as UPNS would create from perhaps an industry like chemicals. think they would be very very concerned about that removing restrictions on remaining independent railroads that hamper their ability to provide competition to upns as well paper barriers etc etc so again not a christmas list a reality list we think this whole thing if you want to talk about christmas maybe it looks like a bag of coal this isn't this isn t anyone trying to get a gift And since you've asked the question, I think I might as well address, and I've tried to and you're probably going to say I don't believe you, bite my tongue, but quite frankly the representations that continue to be made in support of UP's ambitions need to be dispelled. There's been quite a few references and I would say absolutely based on fact, misrepresentations of truth. One, I'll start with this whole analogy about, you know, if it's good for Canada, it's good for the United States. They've got two trans cons up there. Why shouldn't we have one in the United State? And I think maybe to quote one of the commenters, one of them doesn't like us to have the same thing here. Well, let's talk about what the same thing is. Scale and size matters, whether you want to admit it or not. In Canada, you put the two railroads together, it was 21,000 route miles. you look at UP's network alone, it's almost double that. You put the two networks together two and a half times that. If you think about the populations, think about how capital intensive it is to run a railroad, to maintain a railroad. In Canada, and I think Jim knows this because he came from Canada, there's about 40 million people today. An economy that's fed and supports 40 million people. The United States, 350. Scale matters. California, 39. So why don't we take that argument to California? I would say you could probably support two Class I railroads in California. Guess what? There is two Class 1 railroads in California, so size and scale matters. And then the other very, very critical component, and I would suggest that UP would not want the same. I'm not going to speak for them. I am just going to assume they wouldn't, and that comes to the regulatory regime that we exist and operate in in Canada, in a world where you have two railroads. That connected all the major metropolises across the country. There's something called zone switching, zone inter-switching, with a prescribed non-compensatory zone switch rate that's clear and transparent to every customer. And if they don't like your rate from point A to point D, they can exercise a zone switch and have complete transparency to what the rates are and how they can compete and create their best outcome from a customer's point of view. That doesn't exist in the regulatory regime with the STD. To get into a rate case with the SDB takes a prolonged period of time, takes a lot of money, and quite often a lot OF customers have said it's not worth what it requires to try to get that outcome. In Canada, FOA, you get a decision in 60 days. It's pretty quick, it's pretty swift, and it's not consequential when it comes to the money that's on the table, the money you have to pay to get the outcome that you believe is worth fighting for. That's critically important. You can't ignore that. But to say it's the same, it is not the same. It's completely, completely different. I think some of the other points that are completely different, if you think about the two railroads, you think of their aspirations. Let's get to this comment about union support. 50 percent of the union support, the merger, maybe 50 percent are the shingles or 50 percent are the organizations. I haven't gone back and fact-checked that, but I know for a fact that if you get to the voting union members between those two railroads almost 70% diametrically opposed. That's a misrepresentation. It's simply not true. Now, let's talk about this end-to-end. Well, you know what? CPKC, they were end-in. SCB looked at their deal. They offered zero concessions. There was zero for them, there's zero for us. Again, I go back to scale and market power. We were the two smallest railroads coming together to still remain the smallest class one rail network in North America. We haven't created any concentrated market power, and when it comes to enhancing competition, even to the new rules, we were truly end-to-end. There was zero overlap. overlap. We didn't need anyone to come in to solve an overlap problem. We were hand-in-glove in Kansas City. We're additive to customer options, not diluted in any way. So it's not the same. So to misrepresent it as if it is, I think it's insulting. It's just not true. The single line service point, that's one where I agree. I'm an advocate. I said this from the beginning. There are definite benefits of single-line service and eliminating handoffs. I just spoke of one a few minutes ago at Kamloops, but it can't be at all cost. And contrary to some of the representations, not all shippers have 10,000 cars, that when you benefit through single- line service and turn those assets and allow them to reduce their capital costs, yes, that's true. But what about the smaller shippers that are out there in the world, which far outnumber those 10,000 car shippers that own those assets. So again, single line benefit is true. I'm an advocate for it, but not at all costs. Not if you create something so large with so much scale and reach that creates so much market power that it takes customer options away. So, again, I think the truth matters. And I think making proper representations matter. And I think in the end, this regulatory body, from my experience, wants to hear the truth. And that's the final point I'm going to make. This process in and of itself, to me, has been compromised with the way these applicants have behaved. You know, we've heard about it, rumor, conjecture, secondhand comments about, you know, being said, if you're not for us, you're against us. Don't be on the wrong side of the history. Remember the Louisiana purchase. Don't side with the losers. I got a whole list. Because guess what? My phone rings and people tell me when they get threatened. Customers share that. And then I read a letter accusing other railroads of being the ones that threaten. And where I come from, that's like calling the kettle black. Let's be honest about this. And that's what this dispute is that you've read about last week, that the judge ruled on Friday that this video that the applicants have said is proprietary and confidential and has trade secrets or whatever the representations were, that was recorded at a S.W.A.R.S. conference with over 900 participants. Number one, really? And number two, just share what was said. Let people make their own opinions about whether or not they were or were not threatened if they weren't in support of this transaction that should not get approved just because they didn't support the rates are getting raised to teach them a lesson. So that's why we want the video to be public. It's not confidential. It was said in a public domain, and I believe it was said with intent, to chill the room. I'm kidding but not kidding. And to me, in the context of a merger that will change the landscape of this industry forever and put this country at undeniable risk from an operational standpoint and a market power standpoint, this isn't a place to be kidding. Some of these customers that I guarantee you the SDB wants to understand their concerns, the for's and the against, that's their livelihood. So to suggest you're kidding in a venue like that, I don't think you just weigh that off and ignore that. At a minimum, it's reckless and it's irresponsible. And it's wrong. That's akin to me. We'd like to make, the applicants would like to make a lot of airline representations in their analogy of why this merger is necessary. So let's go to the airline industry. What if any of us were to go into an airport and made a joke and said, there's a bomb? I think that would be shocking. And once the dust has settled, even if we say we were kidding, before they took us away in handcuffs and put us in jail, rest assured there's no way that you can assure that someone one of those customers feels comfortable getting on that plane or getting on that train how do you uncrack that egg I don't I don' know how you do I really don't so to me this process is compromised and again the STD ultimately they're the regulator they're the ones that have to make the decision but I believe that the applicants that put them in the quandary. How will they ever know that they're about to make a forever decision, that all the forwards and the against have been properly represented, and when there has been a chill, rest assured, there are people out there, there're customers out there. And I know there's at least one or two that's spoken directly to me. And obviously, yes, there's a whole lot more than that, that have not had the courage to speak, nor will they speak because they're afraid of being retaliated against. So again, not a joking matter. I believe the SDB has been backed into a corner. I think the applicants have placed them at a quandary. So I'm not 99.99, nine-tenths certain of what they might decide, but I'm 100% certain they've got a tough, tough road ahead of them to try to assess facts and application that I would argue is incomplete because of the applicant's behavior. Thank you for the thorough response, Keith. I think a lot of people appreciate it. Thanks. Thank you. We'll go next now to Scott Group with Wolf Research. Scott Group Hey, thanks. I guess after that, maybe I'll do a near-term operating ratio question. Nadine, any thoughts or color on how to think about margin Q4? And then just one more on tech, if I can. If our notes are right from five or six years ago, this was like a ballpark $100 million, $150 million revenue loss for you. Is that the right way to think of getting about half of that back? Is that fair? yeah that's fair ballpark um scott obviously depending on what what uh cbr's volume is for next year that's going to have a um play a role but but you're in the ballpark um and i appreciate the or question scott first time i appreciate it but i'd say that uh we uh When you think about Q4 last year, it was a different environment as far as fuel prices and so forth. So we'll have a bit of a headwind year over year with fuel. But the way volumes started out, October's being extremely strong. So, you know, we saw fuel prices hurt us a little bit just as far as the timing of fuel surcharge and also some crack spread pricing that impacted fuel prices. I'm sure your models have fuel price impact on us a Little bit less than our results came in. So I think that's where there's been a bit of a gap. Now, if things turn and we start seeing diesel prices, spot prices improve, certainly we'll see a benefit of it, from it. The bottom line is, you know, I feel very comfortable. We'll have a sub-60 OR in Q4, given the volume environment, given, as Mark mentioned, how well the network is running. You know, we should have a decent weather environment north of the border. in q4 so far it's been it's being good um and so that always plays a role but i feel feel very good about our ability to have a finish a year strong and have a sub 60 or thank you guys thanks god we'll go next now to konar gupta with scotia bank thanks and uh good afternoon so just didn't seem like the patients around sense for RPM, Marine, and Q4 as it relates to the fuel impact. And then broadly for you, John, maybe similarly, are you seeing any dislocations in your price-sensitive markets due to fuel or fuel-driven inflation? Konark, just so I understand, you're saying sensitive markets relative to the somewhat extreme fuel surcharge inflation that we're seeing? Yeah, I mean, you come to the trucks in some markets, and also there's some price sensitivity in some pockets in your end markets. Yeah, yeah, no, I think I mentioned it earlier. We are seeing it in certain areas. And, you know, whether it just be difference in mechanisms across the rail industry as a whole, different in how mechanisms roll on, roll off against our truck competitors and, frankly, all modes of transportation. It is a pretty significant piece of revenue that's on there right now. And frankly, I'll tell you, customers are looking month to month, I think in some instances on how to ship and how to manage that, or looking at other market alternatives in terms of how to, you know, they might be able to get goods. So I do believe that is a real issue that I think we're all facing right now as we, you knows, manage some of these markets. Gornark, I assume year-over-year sense for our TM, kind of high single-digit increase year-over-year. So, RTMs, as of yesterday, are up a little over 6%. High single-digit sense for RTM improvement year-ever-year, you get pretty significant revenue growth. That's how we're tracking so far. Great. I appreciate the call, again. Thank you. Thank you, and ladies and gentlemen, that's all the time we have for questions this afternoon. Mr. Creel, I'd like to turn things back to you, sir, for any closing comments. Okay, once again, thanks for your time this afternoon. I hope you take away from this call that this company is enjoying some strong operating momentum, Mark. Thank you to the team for that. As long as we continue to operate safely and efficiently against this backdrop of overall favorable demand environment, you can expect us to close this year strong and carry that momentum into 2027. We look forward to talking to you and sharing our results on the next call. Happy holidays. Happy Thanksgiving. and Merry Christmas for our U.S. colleagues. Feliz Navidad for our Mexican colleagues. Merry Christmas, of course, for our Canadian as well. Thank you. Thank you very much, Mr. Creel. Again, ladies and gentlemen, this brings us to the end of today's meeting. We do appreciate your time and participation.