Canadian Pacific Kansas City (CP) Bank of America’s 33th Annual Industrials, Transportation and Airlines Key Leaders Conference summary

Key presentations and strategic updates

• Executives highlighted strong volume growth, robust service metrics, and successful post-merger integration, with record grain shipments and intermodal gains driven by alliances and new facilities.

• Both companies emphasized disciplined capital deployment, with dividend increases, share repurchases, and targeted CapEx for network and locomotive upgrades.

• Labor agreements and operational improvements, including hourly crew conversions and AI-driven efficiency projects, are expected to unlock further productivity and cost savings.

• Ongoing regulatory scrutiny and industry consolidation were discussed, with concerns about excessive rail concentration and its impact on competition and supply chains.

• Both management teams reiterated confidence in achieving mid-single digit volume growth, margin expansion, and strong free cash flow, supported by favorable market trends and operational leverage.

Market environment and operational performance

• Grain and bulk volumes are at record levels, with Canadian and U.S. crops supporting double-digit growth through late summer.

• Intermodal growth is fueled by alliances and infrastructure investments, with new products and faster service offerings enhancing competitiveness.

• Service metrics such as velocity and dwell have improved significantly, translating into cost savings and higher customer satisfaction.

• Both companies are leveraging technology, including AI, for crew management, vehicle monitoring, and pricing optimization to drive further efficiencies.

• Headcount is expected to remain stable or grow modestly, with operational flexibility and labor stability supporting volume increases.

Financial outlook and capital allocation

• EPS growth targets remain in the low double digits, with potential for mid-teens if macro conditions improve; synergy realization is on track post-merger.

• Operating ratio improvements are expected to continue, with sub-60% targeted and potential for mid-50s over time as operating leverage increases.

• CapEx will be maintained at consistent levels, focusing on both maintenance and growth, while free cash flow conversion is set to rise with efficiency gains.

• Leverage is targeted to decline toward 2.75x, with balanced capital returns through dividends and opportunistic share buybacks.

• Both companies see strong opportunities in industrial development, energy-driven growth, and continued network optimization to support long-term shareholder value.