Canadian Pacific Kansas City (CP) Barclays 43rd Annual Industrial Select Conference summary

Industry consolidation and regulatory environment

• Expressed concerns about the proposed UP-Norfolk Southern merger, emphasizing risks of operational integration and market power concentration, but noted minimal direct revenue exposure to east-west competition.

• Stressed that anti-competitive behavior, not competition itself, is the main concern, citing historical issues with Union Pacific's use of market power.

• Regulatory review for the merger is expected to intensify from late April to mid-May, with opportunities for stakeholders to voice concerns.

• Current merger proposals are seen as inadequate in enhancing competition, with expectations for significant concessions to ensure market access and customer benefits.

Merger synergies and operational performance

• The 2023 network combination created a unique north-south corridor connecting Canada, the U.S., and Mexico, enhancing interline options and competition.

• Single-line service from Chicago to Mexico offers truck-competitive reliability, driving modal shift and customer value.

• Achieved $1.2 billion in new revenue synergies from the merger, with an additional $200 million expected in the current year.

• Double-digit EPS growth and mid-single-digit RTM growth are forecasted for the year, supported by strong cost control and record grain harvest.

• Anticipates high single-digit RTM growth if broader economic conditions improve.

Trade, tariffs, and cross-border opportunities

• Tariff changes under USMCA renegotiation led to a $200 million revenue impact, but expectations are for renewed investment and trade growth once uncertainty resolves.

• 18% of revenue is tied to U.S.-Mexico trade, with most traffic being U.S. exports to Mexico; network is well-positioned for future cross-border growth.

• Automotive sector benefits from a virtual loop supply chain, improving reliability and market share despite industry headwinds.