NYSE:CP Canadian Pacific Kansas City Q3 2024 Earnings Report $72.48 -0.59 (-0.81%) Closing price 04/25/2025 03:59 PM EasternExtended Trading$72.24 -0.25 (-0.34%) As of 04/25/2025 06:56 PM Eastern Extended trading is trading that happens on electronic markets outside of regular trading hours. This is a fair market value extended hours price provided by Polygon.io. Learn more. Earnings HistoryForecast Canadian Pacific Kansas City EPS ResultsActual EPS$0.99Consensus EPS $1.01Beat/MissMissed by -$0.02One Year Ago EPS$0.69Canadian Pacific Kansas City Revenue ResultsActual Revenue$3.55 billionExpected Revenue$3.59 billionBeat/MissMissed by -$40.73 millionYoY Revenue Growth+6.30%Canadian Pacific Kansas City Announcement DetailsQuarterQ3 2024Date10/23/2024TimeAfter Market ClosesConference Call DateWednesday, October 23, 2024Conference Call Time4:30PM ETUpcoming EarningsCanadian Pacific Kansas City's Q1 2025 earnings is scheduled for Wednesday, April 30, 2025, with a conference call scheduled at 4:30 PM ET. Check back for transcripts, audio, and key financial metrics as they become available.Q1 2025 Earnings ReportConference Call ResourcesConference Call AudioConference Call TranscriptSlide DeckInterim ReportEarnings HistoryCompany ProfileSlide DeckFull Screen Slide DeckPowered by Canadian Pacific Kansas City Q3 2024 Earnings Call TranscriptProvided by QuartrOctober 23, 2024 ShareLink copied to clipboard.There are 10 speakers on the call. Operator00:00:00Good afternoon. My name is Marjorie, and I'll be your conference operator today. At this time, I would like to welcome everyone to CPKC's Third Quarter 2024 Conference Call. The slides accompanying today's call are available at investor. Cpkcr.com. Operator00:00:15All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to introduce Ashley Thorne, AVP, Investor Relations to begin the conference call. Speaker 100:00:35Thank you, Marjorie. 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 materially. The risks, uncertainties and other factors that could influence actual results are described on Slide 2 in the press release and in the MD and A filed with Canadian and U. Speaker 100:00:56S. Regulators. This presentation also contains non GAAP measures outlined on Slide 3. Please note, in addition to our regular quarterly financials, there's supplemental Q3 combined revenue and operating performance data available at investor. Cbkcr.com. Speaker 100:01:15With me here today is Keith Creel, our President and Chief Executive Officer Nadim Belani, our Executive Vice President and Chief Financial Officer John Brooks, our Executive Vice President and Chief Marketing Officer and Mark Red, our Executive Vice President and Chief Operating Officer. The formal remarks will be followed by Q and A. In the interest of time, we would appreciate it if you limit your questions to 1. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel. Speaker 200:01:43Thank you, and good afternoon. Thanks for being with us today to discuss and review our Q3 'twenty four results. I'm pleased to share the results of our 20,000 strong CPKC family. I can tell you the body of work in what was a very challenging operational quarter with a significant derailment that Mark and the team faced in early July and the strike in August, Both of which they did an exceptional job doing it. They bounced back and the network responded well as a result following up and getting back in sync. Speaker 200:02:13In spite of the challenges, I'll tell you we're proud to say we remain on track to deliver full year guidance, double digit earnings growth, including volume growth, which is better than what we had projected earlier in the year. So specific to the results for the quarter, the CPQC family delivered revenues of $3,500,000,000 which is up 6%, strong volume growth, an increase of over 4% and operating ratio of 62.9%. Earnings per share of $0.99 which was an increase of 8%. Most importantly, from a safety perspective, continued improvement, the training actions decreasing 17%, personal injuries decreasing 8%. On the operating front, continued strong performance across the network, which Mark will provide a bit of color to, but I'd like to specifically recognize the operating team specific to those challenges with the strike. Speaker 200:03:03They did an exceptional job in preparing for and bouncing back from the audits that we experienced as a result of the strike. Commercially, John and his team as well continue to generate industry best sustainable, profitable growth. We're delivering unique products to the market with a strong service offering to our customers that's reflected in the results that we're going to share with you today. The ANR, that's another exciting development over the quarter. I'm pleased that we received approval last week from the SDB for our new direct connection with the CSX in New Mexico, Texas and the U. Speaker 200:03:36S. Southeast over the MVNR corridor. I'd like to specifically again thank the SCB for their thorough review and approval of this full competitive transaction. The new interchange that we're establishing with CSX is going to provide a new competitive rail service to rapidly grow markets. It's going to bring new solutions to our customers and take trucks off the road. Speaker 200:03:57It's another example again of this unique growth story that the CPKHC franchise is delivering. On the hydrogen locomotive front, another milestone reached in the quarter. When it comes to our hydrogen locomotive program in early September, I'm very pleased to say that our first high horsepower hydrogen locomotive along with the fuel tender joined the consist of 3 diesel locomotives in fully loaded bulk train in our Western Canada corridor. Certainly an impressive achievement for demonstration again of this company's commitment to leadership and sustainability. But let me say in closing, I'm proud of the results teams produced. Speaker 200:04:35We're off to a strong start in Q4. We're in a great position for a strong finish to 'twenty four and an even more exciting transition into 2025 and momentum. With that, I'm going to hand it over to Mark to provide some comments on the OpEx performance, John provides color on the markets and then Dean will wrap up elaborating on the numbers. Speaker 300:04:54Okay. Thank you, Keith, and good afternoon. Looking at the quarter, I'm extremely proud of our railroaders for the continued hard work to be safe and reliable service. In the Q3, we continue to drive strong year over year operating improvements. If I look at the average terminal dwell, declined 8%, average train speed increased by 6%, locomotive productivity improved by 8%, and just to round off the fuel efficiency improvement by 2%. Speaker 300:05:25Automobiles are results demonstrating an efficient fluid resilient network that is delivering strong service to our customers. These results are particularly impressive given the challenges we faced in the quarter. I'm proud of the resiliency this network and team has displayed. As Keith mentioned, we navigated through a 4 day work stoppage bridge across our Canadian operations. And thanks to the hard work and preparation of the team, I'm pleased to say that we have a quick, efficient transition back to normal operations. Speaker 300:05:54I'll be frank, it was probably one of the best that I've seen in my career as we started this network back up. And you can contribute this to the operating team working closely with the customers and rail partners to minimize the interchanges and disruptions that we see as an operating team. But the work stoppage behind us, we're well to deliver to continue delivering the growth that we are needed that we are committed to and strong service that our customers expect. Thank you to all the railroaders who contributed to this outcome. Looking at safety for the quarter, if I look at FRE train accident frequency at 1.27, that is 8% improvement year over year. Speaker 300:06:32If I look at the personal injuries, we were 0.85%, which is 17% year over year improvement. I'm pleased with these results and the safety of the journey. We will always strive for further improvement. We also continue to execute on a number of initiatives that are improving efficiency and operating performance. The engineering team in coordination with the operations has improved in efficiency significantly reducing slow orders across the network and also train delays. Speaker 300:07:00Part of the leverage data from the investments in autonomous geometry testing curves to help us accurately plan in preventive maintenance and capital investments. Looking forward, there are additional benefits to realize these investments as we deploy these cars across our network, but specifically in New Mexico as well. And as we continue to make interoperability upgrades to the CP or excuse me, the legacy KTS fleet, so we can lead trains in Canada, by end of the year, we'll have about 175 upgraded locomotives to be fully interchangeable across the North American network. Looking at capital, we're executing to our plan to support safe and sustainable growth through the investment of the network. In the 1st three quarters, we have in service 6 new signings as part of the $275,000,000 merger commitment capital commitment. Speaker 300:07:55Two signings will be targeted by the end of the year, along with a capital project in and around Kansas City area that will come online this year as well. Capacity in Kansas City will further help us align and streamline the connection between the 2 networks, 2 legacy networks improving the service through this key quarter. We've also in service new sidings in Mexico along with crossovers and tractor alignment in our Escobedo yard, improving our capacity and fluidity in a key and growing segment of our network. Additionally, sidings and other investments in Mexico Capacitors are on the way, scheduled to go into service in Q4. These projects are targeted to improve the efficiency of our local and guard operations so we can run mainline trains while we serve customers, clearing the mainline increase in the throughput. Speaker 300:08:43Finally, I'm pleased to announce we're still on time with the Laredo Bridge. 2nd span will be opened by the end of the year. Before I turn it over to John, I'd like to share my enthusiasm for the first phase of our high horsepower hydrogen locomotive test completed in Q4. This is a tremendous accomplishment. It's the result of a lot of hard work and dedication to objectives. Speaker 300:09:08In summary, we're operating safely and efficiently. The network is in excellent shape. Our investments are creating capacity. We have a strong momentum hit in the Q4. With that, John? Speaker 300:09:20All right. Thank you, Mark, and good afternoon, everyone. I'm extremely pleased with the top line performance the team delivered despite the work stoppage in the quarter. We are creating and delivering on the unique opportunities, the strong service product we have and we're pricing to the value of the capacity of our service. Now looking at our results, this quarter we delivered freight revenue growth of 6% on a 4% increase in RTMs. Speaker 300:09:48This performance was despite the 4 day work stoppage that Keith and Mark spoke to, and this was a 3% headwind to RTMs in the quarter. Our cents per RTM was up 2% with strong pricing partially offset by mix. Now taking a closer look at our 3rd quarter revenue performance, I'll speak to the FX adjusted results, starting with both. Grain revenues were up 10% on 7% RTM growth. U. Speaker 300:10:15S. Grain volumes grew 11% percent RTM growth. U. S. Grain volumes grew 11% over the prior year. Speaker 300:10:23Our franchise is benefiting from strong production in our growing regions and increasing shipments to Mexico as we connect new markets and create new opportunities for our grain customers. Canadian grain volumes grew 3% with increased wheat to Mexico and the ramp up of harvest across the Canadian prairies. Now looking forward, we expect Canadian grain production in line with our 5 year average and our comps in Q4 and early 2025 are favorable as farmers held on to their crop a year ago. Now that favorable volume setup coupled with regulated grain pricing of approximately 6.5% has us well positioned in Canadian grain. So looking ahead for grain as a whole, we are working closely with our customers across all three countries and expect to deliver strong grain results into Q4 and well into 2025. Speaker 300:11:22In potash, revenues were up 7% on a 20% volume growth. We moved higher volumes of potash with Canpotek to the Portland terminal as demand remained solid and we lapped the shiploader outage in the ILWU strike last year. Since our work stoppage this quarter, the potash supply chain has normalized and demand for export potash service is at an all time high. Coal revenue was up 8 percent on a 2% decline in volume. Lower natural gas prices weakened demand for U. Speaker 300:11:58S. Coal and the strike impacted our Canadian coal shipments to Vancouver and Thunder Bay. Now as we move into Q4, we've seen both of these supply chains stabilize resulting in increased coal volumes on our network. Moving over to merchandise. Energy, Chemicals and Plastics revenue grew 10% on 6% volume growth. Speaker 300:12:20Volume growth in the quarter was across multiple commodities driven by our self help initiatives, synergy wins and more market share gains. Now looking at Q4, with the ongoing ramp up of these business wins and growing demand for LPGs, we are set up for a solid year end for ECP. Forest Products revenues and volumes were both down 1%. This is an area that continues to be impacted by a soft macro environment and we are experiencing pressure on our Facebook business. We are able to partially offset these impacts with our unique synergy growth and our extended length of haul. Speaker 300:13:02We are focused on what we can control in this area and the unique opportunities that this franchise unlocks. I'm confident that we are going to be in a position and strength as the construction and paper markets rebound in the future. Metals, Minerals and Consumer Products revenue was down 3% and 8% volume decline. Now much like the forest products area, the softer macros impacting our base business in this area, along with lower volumes of frac sand and from a steel facility in Mexico as it slowly ramped back up following a labor disruption. Moving to the automotive area. Speaker 300:13:43This business segment produced another record quarter with revenue up 27% on a 37% volume growth. This franchise continues to benefit from our closed loop service that we introduced shortly after control of the KCS and is developing longer haul volumes across our network. Our new Dallas auto compound along with other investments in auto racks and expanding our Chicago compound has helped us to deliver an entirely new supply chain model for the OEMs, giving them new competition, service and capacity certainty like they've never had before. Now looking forward, we expect our auto business to continue to drive differentiated growth as we benefit from these gains and the opportunity to compete for new business in the years ahead. On the intermodal side, revenue was down 5% on a 2% volume growth. Speaker 300:14:46Starting with domestic intermodal, volumes were down 7% impacted by lower short haul business in Mexico that was demarketed late last year and the work stoppage as customers temporarily shifted some of their business to trucks. This decline was partially offset by growth on our MMX 180, 181 cross border service, which continues to perform extremely well in an otherwise very challenging domestic market. Now looking forward, we have a strong pipeline of opportunities in this area, including wholesale, retail shipments and also our temp controlled service offerings. I'd like to also take this opportunity to share my enthusiasm for the FPD's approval of our MNBR transaction. This is just one example of the several unique opportunities that we are developing, which will continue to offer new optionality in a routing efficiency for many of our customers. Speaker 300:15:50On the international intermodal front, volumes were up 12%, primarily due to onboarding our new contract with O and E that started up in June and lapping the impact of our port strike a year ago. In this space, we are excited as ever about our opportunity to grow our international cross border service out of Lazaro. More to come as we move into 2025, but we are expanding the scope of our test shipments with a number of key customers who are interested in creating diversity and adding more resiliency into their supply chains. So to close, volumes came in better than expected, excluding the impact of our work stoppage. And I'm very pleased we are in a position to improve our RTM outlook to mid single digits for the year. Speaker 300:16:40And while the macro certainly remains challenging in a few areas, we continue to have line of sight to unique growth opportunities from synergies, self help and strong pricing. Our outlook is supported by the reliable and resilient service that Mark spoke to and that our operating team across 3 countries continues to deliver. And I'm very excited of what we have accomplished so far this year and will continue to accomplish in the years ahead. With that, I'll pass it over to Thanks, John, and good afternoon. This quarter was marked by strong core performance and the continued execution of our unique strategy that is delivering disciplined growth. Speaker 300:17:22I'd also like to thank our best in class team of railroaders whose continued focus on and execution deliver these results despite challenges in the quarter. Now looking at our results on Slide 12, PPKC's reported operating ratio was 66.1% and the core adjusted combined operating ratio came in at 62.9%. Diluted earnings per share was $0.90 and core adjusted combined diluted earnings per share was $0.99 up 8% from prior year. Taking a closer look at our expenses on slide 13, I will speak to the year over year variances on an FX adjusted basis. Comp and benefits expense was $644,000,000 or $640,000,000 on an adjusted basis. Speaker 300:18:12The year over year increase in comp and benefits was driven by higher stock based compensation along with inflation and volume driven increases from higher GPMs. This increase was partially offset by efficiency gains from reduced overtime, improved train weight, improved crude utilization and other productivity gains as we continue to optimize the combined network. Looking to Q4, we continue to expect average head count to be roughly flat on a year over year basis, driving further labor productivity gains as we grow volumes, particularly at bulk. Fuel expense was $419,000,000 down 2 percent year over year. The decline was driven by lower fuel prices and a 2% improvement in fuel efficiency from running longer and heavier trains, which resulted in $8,000,000 in P and L savings for the quarter. Speaker 300:19:04These savings were partially offset by volume driven increases from higher GTMs. Material expense was $99,000,000 or $98,000,000 on an adjusted basis. The year over year increase was driven by higher locomotive maintenance from increased fleet utilization along with higher GTMs and inflation. We also in sourced the locomotive maintenance contract in the quarter, which resulted in incremental material expense, but a favorable offset within purchase services and other for net savings in the quarter. Within rents were $89,000,000 down 4% year over year. Speaker 300:19:40The decline was driven by higher receipts from increased participation in the fleet pool, reduced car hire payments along with efficiency gains from improved cycle times and increased network velocity partially offset by inflation. Depreciation and amortization expense was up 4% year over year resulting from a higher asset base. Purchased services and other expense was 6 $23,000,000 or $599,000,000 on an adjusted basis. The line was impacted by lapping insurance proceeds received in Q3 2023 as well as higher in quarter casualty costs and inflation. These increases were partially offset by reduced intermodal services expense, efficiency savings and in sourcing synergies and savings on insurance renewals. Speaker 300:20:34I am pleased to see continued efficiency and synergy gains. We expect these gains along with the impact of lower inflation to be sustainable and continue improving our cost structure going forward. As we move below the line on Slide 14, other components of net periodic benefit recovery was $89,000,000 in Q3, reflecting a lower discount rate compared to 2023. Net interest expense was $192,000,000 or $188,000,000 excluding the impact of purchase accounting. The decline was driven by reduced debt balance. Speaker 300:21:08Income tax expense was CAD262 1,000,000 or CAD295 1,000,000 on a core adjusted combined basis. We now expect to see BKK core adjusted effective tax rate to be approximately 24.75 percent for the year. Turning to slide 15, we are generating strong cash flow with cash provided by operating activities of RMB1.272 billion in Q3. Capital investments and safety and growth remain our priority. In this quarter, we reinvested $748,000,000 in line with our continued expectation to invest approximately $2,750,000,000 in 2024. Speaker 300:21:51As Mark discussed, we continue to make strategic investments in capacity across our network, positioning us to continue officially absorbing the growth that this merger has enabled. We generated CAD523,000,000 in adjusted combined free cash flow and continue to repay debt. Our leverage ratio is 3.1 times and we still expect to reach our target leverage of 2.5 times in early 2025, at which point we will evaluate shareholder returns with our Board. In review of the quarter, the team continues to deliver industry leading volume growth along with continued discipline on price and cost controls. The net impact of the work stoppage was 100 basis points headwind to the quarter, primarily driven by the loss in revenue from temporary diversion and supply chain delays. Speaker 300:22:41That event, along with higher casualties and stock based comp, combined for a 300 basis points or 0 point 11 dollars year over year headwind to Q3 operating ratio and EPS respectively. As all of these impacts were isolated in the quarter, we believe that we are well positioned for sequential and year over year OR improvement in Q4. Strong core performance puts us well on track to deliver double digit core adjusted combined earnings growth in 2024 and mid single digit volume growth, which is an improvement from our view at the beginning of the year and industry leading. This all adds up to strong positive momentum as we head into 2025 and feel good about the opportunities that we have ahead of us. With that, let me turn things back over to Keith. Speaker 200:23:26Okay. Thanks, Hadeem, John, Mark. Operator, let's open it up for Operator00:23:44Your first question comes from Chris Wetherbee from Wells Fargo. Please go ahead. Speaker 300:23:50Yes. Hey, thanks. Good afternoon. Maybe if I could start like kind of higher level, Keith. I was kind Speaker 400:23:56of curious if I could get your take on what we've seen coming out of Mexican legislation potentially about some rail reform down there. I want to get a sense of how you guys are thinking about that. Is it something we should be concerned about from a risk perspective? Speaker 200:24:08Yes, great point, Chris. I think the best way to kind of summarize the way I feel about it is encouraged. We had some progress, had some face to face meetings and clearly understood the mandate from the previous government. I would say that at this point everything that's happened with the new President has only reinforced that and in fact expanded upon that. I was very encouraged to hear a couple of weeks ago, I guess it was on a Sunday at Quechua which is where the aspirational passenger training would be destined to from Mexico City along our right of way. Speaker 200:24:42The President announced that not only have they committed in our platform, but the vision is protect freight, create a dedicated corridor for 2 passenger tracks in the adjacent right of way. So I think it uniquely complements the other thing I'm very encouraged by. It's her commitment to the environment. In her comments relative to the need to get trucks off the road to create additional highway capacity, be friendly with the environment and bring additional business to the railway. So we are part of the solution and as long as they're part of the solution, I think with a very sovereign country that's focused on growth and being part of a strong 3 continent commerce system, I think you're in a good spot. Speaker 200:25:26So again, encouraged. Speaker 300:25:30Okay. That's helpful. And just one point of clarification, just Nadeem, Speaker 400:25:34you talked in the short term about some improvement both sequentially and year over year and the operating ratio in the Q4. Speaker 300:25:40I don't know if maybe you could put a little bit of a finer point on some Speaker 400:25:42of the opportunity here because obviously RTMs seem like they're ramping back up, there's grain opportunities in the Q4 that could be probably accretive from an OR perspective. Any other incremental thoughts we should be thinking about for the Q4 specifically? Speaker 300:25:55Yes. So we had that labor disruption that had 100 basis points headwind to the Opel OR in Q3. Obviously, we had a very unfortunate drill in Bordelac, North Dakota that was about $60,000,000 expense hit. And so those are 2 unique items. Stock based comp was a big headwind in Q3. Speaker 300:26:19So when I look at kind of those one time items not occurring again in the Q4 and I look at the opportunity for operating leverage, grain has started off quite strong. We had a robust crop ahead of us. We got a strong bulk of look at the whole. If you factor all of that together and the ability to move at a low incremental cost, I mean, Chris, I believe that we have the opportunity sequentially to have a 500 basis point improvement in the OR. So stay tuned. Speaker 300:26:53Appreciate the time. Thank you. Operator00:26:55Thank you. And your next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead. Speaker 500:27:02Yes. Thanks very much, operator. Good afternoon. So I'd like to talk Speaker 600:27:05a bit about your volume growth here. I mean, you increased your projection here on expectations for this year. Just curious, this is on a backdrop of still weak macro environment. So presumably, you're getting a lot of kind of esoteric volumes here. Can you talk a little bit about those? Speaker 600:27:24And in particular, is it causing you to somewhat rethink your 28 targets of $1,500,000,000 revenue synergy on the upside or even your $5,000,000,000 kind of revenue pipeline, as you've seen a little bit more opportunities and what's developing on this new network? Are you seeing upward revisions to that kind of outlook? Speaker 300:27:52Well, maybe I'll start. Walter, thanks for the question. Focusing on the near term, as the team has already spoke about, our bulk franchise is very encouraging. Not only do we have a strong Canadian grain crop that I think is sort of well known and moving well, But we also have a really strong crop not only in our Upper Plains, North Dakota, Minnesota region, but also down in the Missouri, the legacy KCS region. So really, I'm going to say the perfect storm as it relates to grain and opportunities to move a lot of freight in that space at low incremental margins. Speaker 300:28:38Now if you look beyond that in the bulk, we've got, as I said, Mosaic and others had in Q3 On the domestic front, we have a really strong domestic pull right now also. So I feel really good about the fertilizer and potash space. And frankly, we have some catch up to do with Elk Valley and our coal opportunities, not only in Canada, but also a fair amount of maybe stronger demand on our some of our legacy coal franchise in the U. S. So the bolts are set up well. Speaker 300:29:25We've seen an uptick in our domestic intermodal business across Canada and we continue to perform well in our new MMX service. I think the last I look, if you kind of neutralize for some of the headwinds on the business that left our network, we're up 27% I believe on the year and growth on that training. So good outlook there. International Intermodal, frankly since COVID it's been tough to really tell how those international Intermodal volumes will move up and down. But the lineup right now to close out the year with our customers continues to look strong. Speaker 300:30:13And in fact, we're seeing some really good growth out of Porto St. John with our services out there. So I feel pretty decent about the intermodal area. As I said, we're going to continue to battle in some of those merchandise and forest products areas for the foreseeable future. But I think what makes us unique and maybe to your part of your question is, there's so many extended length of haul and new business development opportunities in the ECP ECP space to leverage this franchise and frankly in the merchandise and forest products space also that we've been able to, I would say maybe outpace the industry a little bit in those areas. Speaker 300:31:01And what gives me comfort is we start to see any sort of rebound in some of those macro areas. And I think it's going to be quite a tailwind. So all that to say, I feel comfortable with we sit roughly around 4% RTMs year to date right now. I see the demand out there to improve on that as we move through the final couple of months of the year, work hard with our customers and the supply chains to make that happen. And frankly, I certainly believe Walter, the future is bright as I look into the future and what 2025 and beyond looks like. Speaker 300:31:47But I think I'll leave it at that in terms of what our outlook is in those out years. Speaker 600:31:54Great color. Appreciate it, John. Speaker 300:31:56Yes. Operator00:31:57Thank you. Your next question comes from Jon Chappell from Evercore ISI. Please go ahead. Speaker 300:32:04Thank you. John, I'm going to stick with you. From when we measure yield, whether it's revenue per RTM or revenue per carload, the numbers look pretty strong. So just generally on kind of core pricing momentum, but also I just wanted to highlight auto and intermodal from a revenue per RTM perspective, a little bit of pressure there. Was that a Speaker 200:32:25length of haul issue? Was that Speaker 300:32:26a new service kind of mark to market? Or were there any kind of more extreme competitive pressures in those segments that maybe had them lag the core portfolio? Yes. Thanks, John. You nailed it. Speaker 300:32:40I'll give you the stats. Our automotive lane to haul in the quarter was up 17% and our intermodal lane to haul about 20%. So that is exactly what you saw in those numbers. As a whole, I would say, I'm confident to say that we're this team is taking out of the park in terms of pricing for the value of the service and the capacity that this network has. I'm super pleased with our year to date performance. Speaker 300:33:11And just be candid, we're actively running north of 5% in a lot of those discussions and outcomes with those contracts. And what makes me feel good about that is as we do that, that gives us a nice tailwind as you think about 2025 and what our same store looks like. Now, there's no doubt there's certain areas where we're feeling more pressures and certainly the intermodal space with all the trucking capacity and the cheaper spot rates for trucks. That has been a little more challenging. But lastly, we start to see a little bit of tightening as we move into 2025 in that space. Speaker 300:33:58And honestly, there may be a little bit of catch up opportunity. I guess, maybe the last point, John, and I think this is important just to point out. As you look ahead into Q4, do know we are looking at a pretty significant fuel headwind as it relates to that sense for RPM, but that's maybe just something to keep an eye on. Helpful. Thank you, John. Operator00:34:28Thank you. Your next question comes from Fadi Chamoun from BMO Capital Markets. Please go ahead. Speaker 700:34:35Yes, good evening. Thanks. Kind of staying on the commercial side a little bit. So the Gemini Alliance, I think, announced some schedules. They start up their service in February. Speaker 700:34:49And we've noticed kind of they're highlighting 3 ports that you serve being part of their loops. And I was wondering if you have any insight into what this might mean or translate into your network or your share in that kind of life as we go into 2025? And kind of follow-up on some of the discussion earlier, like if you're not kind of prepared at this point to talk about volume growth guidance for 2025, can you give us an idea what you feel this synergy pipeline will look like as we progress into 2025? I think you said in the prior call $800,000,000 exit run rate for 2024. What does this look like 12 months from now, if you can provide any kind of insight into that? Speaker 700:35:39Thanks. Speaker 300:35:41Okay. So, there's a few pieces to unpack there, Fady. I'll start off with Gemini. Certainly, we have had a long standing and really, I would say strategic at the highest levels relationship with Hapag Lloyd, a tremendous amount of respect between our companies to grow, to expand our partnership where we can to be very strategic. So certainly, we feel very good about their prominence as part of that alliance. Speaker 300:36:20As you know, also we've expanded our relationship over the years, most recently with Maersk in the development of our Transload facility in Vancouver, where we utilized our land assets and built partner with them to build that facility. But also we've steadily grown our trust and our relationship with their ITI business, not only into Canada and down into the U. S. So naturally, I think we feel really excited about the Gemini opportunity. Frankly, their precision model that they want to deploy and how they deploy their ships and their assets and their port terminals really matches up philosophically with how Mark and Keith drive our rail with how Mark and Keith drive our rail operations on a daily basis. Speaker 300:37:15And I think that could yield a really positive strategic relationship. Now look, it's in the early days and we're working through what that's going to look like. But I just take, for instance, Lazaro and specifically to the synergies you were asking about. That scenario where it hasn't grown and that opportunity for cross border out of lateral, maybe hasn't grown as much as we initially thought or as fast as we initially thought. But with APM Terminals and making the investments they're making and I think the commitment Gemini has to grow that business, along with the investments that Hutchinson is making, we see a tremendous opportunity to begin to see that volume grow through that Lazaro terminal. Speaker 300:38:08I will mention to you, Lazaro is still the fastest growing North American port that's out there. I think year to date, 30 2% is the last I saw. Volumes are up. I can tell you our rail volumes are up 27%. Now again, majority of that is servicing domestic Mexico. Speaker 300:38:27But again, we are seeing a fair number of, I would say, singles and doubles as we expand that service. Maybe the last piece on Gemini, and I think this is worth mentioning is, with the investments that DP World has made at Port of St. John, it's really beginning to unlock that next step function of capacity at that terminal from the 300,000 Puu a year potential to 800,000 Puu a year with the development and addition of cranes at that port. So again, I think just another example of how we potentially believe the partnership and the expanded service calling into that port to generate growth in 2025. Specific to the synergies and the exit run rate, I continue to feel really good. Speaker 300:39:32Obviously, we only got a couple of months to go with our exit run rate of $800,000,000 to close out this year. I'm probably not allowed to give you any guidance beyond that into 2025. Other than that, I feel no reason why, if we keep doing the things we do, we execute on these business development opportunities, MNDR, the Lazaro and the Gemini. You'll begin to see our Maricold project in Kansas City and other locations unfold. We continue to gain momentum with our MMX service north south. Speaker 300:40:13I see no reason why we can't see that synergy number continue at the pace of growth that you've seen through the first, I guess, 2 years of our Speaker 700:40:25control. That's great. Thanks. Operator00:40:30Thank you. And your next question comes from Scott Group with Wolfe Research. Please go ahead. Speaker 500:40:36Hey, thanks. Afternoon, guys. So I don't know if this is for Nadeem or Keith. As I think back to the Analyst Day last year, you talked about a sort of multi year high single digit revenue, I guess, probably mid to upper teens earnings growth. And I think you told us 24 might be less than that, right, because you Speaker 700:40:55don't have the buyback yet. Speaker 500:40:57It sounds like the buyback is going to start next year. So I don't know, again, Nadine and Keith, any puts and takes we should be thinking about for next year that you know about at this point that make that algorithm more or less likely to play out? Speaker 300:41:16Yes, Scott. I mean, obviously, we'll give our formal guidance in January with our Q4 results. But I think you captured it well. Nothing is changing as far as our multiyear outlook. We're holding the line in terms of what we guided to last June, which was, as you said, high single digit revenue growth, double digit EPS growth, CapEx in that around 2.6 to 2.8 range. Speaker 300:41:43And as you said, we're not getting the benefits of the buyback now, but we should start seeing that benefit next year once we reinstitute a buyback program. So as I look at where we're exiting 2024, we know we've got a strong crop ahead of us. We know some of our key wins and synergy opportunities are going to give us a very idiosyncratic opportunity to grow and be an industry leader in growth again next year, I would fully expect. So, you can assume that what we guided to is we'll start hitting our stride in 2025. And so I have no reason why we shouldn't be able to hit what you just mentioned in terms of our 2025 numbers. Speaker 700:42:40Helpful. Thank you, guys. Operator00:42:44Your next question comes from Tom Wadewitz with UBS. Speaker 800:42:50Yes, good afternoon. Wanted to see, John, if you could give some thoughts on where you might be more optimistic in 2025 just in terms of which markets do you think can really continue to go strong and be drivers of growth? And then also, I guess, Mark made some comments at the beginning about some capacity investments that potentially enable you to I don't know if that creates more growth opportunity as you add some capacity, but just some thoughts about where should we be most optimistic in 2025 in terms of specific markets? Thank you. Speaker 300:43:31Yes, sure. Thanks, Tom. So I think 2025 could shape up, at least in my mind, a little bit how we're closing out this year in terms of I don't know what we're going to get out of the organic base book. If we're going to see a turnaround and rebound and some tailwind there, I'm certainly hoping for it, but we're not counting on it. This kind of is going to rinse and repeat in terms of self help initiative and over deliver the synergies. Speaker 300:44:07And it's really that lift that I just spoke to that excites me. I do believe there's opportunity for good growth in international intermodal, not only with Gemini as I spoke to quite a bit with other players. And now with our diversity across Vancouver, St. John and down in I think gives us a strong growth platform. Ramp up of MMX still get mark on me quite a bit that we're not running long enough trains on that service. Speaker 300:44:51And so I have a definite opportunity to continue to price into and fill up that North South service. Now the good news is I see a strong pipeline of opportunity on driving and on auto parts, on a whole variety of different items and we haven't even really scratched the surface on our refrigerated product. I'll remind you that that facility that Americold building will be up and running here, let's call it June, July of 2025. But I can also tell you we've been very candid about this is about creating an ecosystem. It's about creating a differentiated product in the marketplace that really can go after truck volumes that are moving today. Speaker 300:45:44So I see the opportunity as we move into 2025 to expand the number of terminals we have co located in this area. 2 or 3 or 4 more facilities, which again gives us that ecosystem that excites me. Maybe one of the last areas and we don't talk about a lot is our carload business, Tom. It's an area of kind of the world of singles and doubles, but again also really accretive in business to our portfolio. And the team there has done a great job as I think about how we expand our presence in the markets in Texas, particularly Dallas, how we continue to expand our fuels terminals in the Toronto and Eastern Canadian markets. Speaker 300:46:46And then also the ongoing demand that we're seeing really as you think about that Gulf region to grow our aggregate business down in there and creating transload and solutions to service those markets. So those are a few of the key ones. And I really didn't even mention autos, Tom, as you think about that area because we still have a lot of contracts out there that we'll be rolling over that we think we've got a really good service product to offer those OEMs. Speaker 800:47:22Great. That's very helpful. Speaker 300:47:26Yes. From a capital side, what I would say is, as John brings this business on, obviously, we still need to work on getting some of these local results on mainline where we can't pass drains. When we talked earlier, that's what we that's what we're focused on to make sure yard separations, local separations, we can continue to run an operation parallel with the road service. The biggest thing we'll hit end of this year is really double capacity of Laredo Bridge. KCS made that investment. Speaker 300:47:55We finished it. We'll bring it across the finish line here soon. And that will create a lot of capacity to get across the bridge, 181, 180 amongst other grains and other products that could come across as well. Another piece is really just Kansas City just as we treated it as 2 railroads years ago as we look at it today as one network. We don't want to drive everything into Kansas City. Speaker 300:48:18We want to create a path where we could bypass Kansas City for dwell purposes, for speed, for car miles, for car days. So working through those capacity changes as well. So, Jiveen can continue to grow the business, but we can serve the customers as they expect us to serve. Speaker 800:48:38Great. Thank you. Operator00:48:41Thank you. And your next question comes from Ken Hoexter with Bank of America. Please go ahead. Speaker 900:48:48Hey, great. Good afternoon. Nadeem, that was a great rundown before on the potential for 500 basis points sequential OR improvement. You talked about the 100 basis point impact. Can you clarify, you just went so quick, the 300 basis point impact. Speaker 900:49:01You just went there. I just want to make sure I understand the difference. And then my question for John is thoughts on potential for additional tariffs. If we get an administrative change here, your thoughts on imports to Mexico, Canada maybe cross border, how should we be thinking about this as we prep over the next few weeks? Speaker 300:49:21Yes. Ken, the year over year impact to stock based comp was part of the 300 basis points. And then we had a $50,000,000 increase year over year on derailment costs, dollars 60,000,000 came from 1 in particular in Board of LAC. So that combined with 100 basis points from the impact of the work stoppage is the full 300 basis points. Thanks. Speaker 300:49:52Yes, Ken. Look, it's a little bit of a wait and see obviously on how that's going to play out. Again, I'm really encouraged basis to the comments Keith made earlier around kind of the administration in Mexico staying aligned or maybe even double down a little bit here most recently around the desire to grow and to support commerce in Mexico to support North America. I kind of resting a little bit on the fact that whatever administration comes into play, I think commerce for North America is important. And ultimately, I think, whether you look back at the current administration or maybe the one previous to that, that is what won the day. Speaker 300:50:50USCMCA was obviously created during the first Trump administration. And ultimately turned into, I think, good piece of policy for the 3 countries. So we'll navigate it. Obviously, we're staying close with our customers on this file. We're going to be active, no doubt, with whatever government's in place in the U. Speaker 300:51:19S. And also in Mexico and Canada. And we'll navigate whatever those tariffs are may or may not look like as we move into the future. Speaker 900:51:35Great. Thanks, John. Speaker 300:51:37Thanks, Maggie. Operator00:51:39Your next question comes from Brian Ossenbeck with JPMorgan. Please go ahead. Speaker 900:51:46Yes, thanks. Appreciate you taking the question. So maybe just a couple of quick follow ups for John there. Would you say you've already felt some of the impact of this uncertainty with constitutional reform, the passenger rail, just the broader tariff question in the elections and the transition of both administrations in the U. S. Speaker 900:52:05And Mexico. I mean, foreign direct investment has been pretty soft for a little while. So do you think you've already felt and seen some of this and potential for it to improve when there's some certainty in terms of what the rules of the game are? And then just maybe more specific, it looks like there's been some trouble south of the border with your competitor handling some of the grain shipping over there. So you talked about a strong grain harvest and then a second bridge of the Rado. Speaker 900:52:28Do you think that's an opportunity for you guys to pick up some additional share given the circumstances? Thanks. Speaker 300:52:36It's hard to tell in terms of any sort of impact. We were talking about it actually prior to the call a little bit. There's so much activity that's been announced in Mexico to support the auto industry, plastics, appliances, white goods, that we continue to work through with those customers down there that present huge opportunities for our cross border shipments. It really gets tough for me to see, is there a marked slowdown or not? I think my answer is no. Speaker 300:53:19I really haven't seen any impact at this point. And actually just most recently, I can tell you we are down in front of some folks that just announced some recent production down in Mexico. And there was no apprehensiveness from them whatsoever in terms of moving forward with their investments. And that was for an investment coming into Mexico. So we're going to have to just see how that plays out. Speaker 300:53:46I think the fundamentals just continue to support a North American economy, continue to make sense. You mentioned about the grain, some of the grain challenges in that. Yes, I think we've certainly seen some opportunities migrate to our network. But I'll also tell you, and you've heard this from us a long time, we're not going to oversubscribe, we're not going to oversell. We're going to be very disciplined on what those opportunities look like. Speaker 300:54:15And that doesn't disciplined on what those opportunities look like. And that doesn't mean we're not willing to work with our other Class I partners because we certainly we are and we do. But I also want to make sure that if we we're going to take on some new business down in those lanes that Mark and his team can execute it. Because as we've said a number of times, building that trust with the customers is paramount. And once you burn them, it becomes a hard sell to get it back on your railroad. Speaker 300:54:51And then I guess last, you said the second bridge, you're darn right. I believe it's a huge sales tool. It is something that myself and my team and our team down in Mexico are making sure our customers understand that additional capacity lift that we're going to gain, that not only will continue to promote, I think, world class fluidity through Laredo, but also give us the capacity to grow and grow with certainty with those opportunities that I'm talking about. So that presents a significant opportunity for my team in the future. Very helpful. Speaker 300:55:36Thank you, John. Operator00:55:38Yes. Thank you. Your next question comes from Steve Hansen with Raymond James. Please go ahead. Speaker 300:55:46Yes. Thanks for your time, guys. John, I want to follow-up on your last comments on grain. I think you've spoken pretty positively to the North South grain movement here for the past 2 or 3 quarters now. It's obviously somewhat crop dependent. Speaker 300:55:58But how would you characterize your progress so far in Grain and establishing that new North South quarter or North South Lane that you've been trying to work on relative to maybe your initial expectations? Thanks. Yes. I'd say we're ahead of pace, a little bit on that front. If you just think about our makeup of synergies and grain that's coming off of the legacy CP network, terminating on the legacy KCS network. Speaker 300:56:24We're, I would say, ahead of pace. But nowhere to where I want to be on that front, Steve. I truly believe we're just scratching the surface in terms of creating optionality for those brain companies to sell into different markets like they've never had in the past. My CEO would always tell me, I would always complain that I didn't have enough grain markets for my shippers and we don't have that excuse now. We've got a really good service product to go into the South and into Mexico. Speaker 300:57:05So I'm super excited what 2025 can bring in that space in terms of not only grain out out of Canada, down in New Mexico, but across all of our Upper Plains terminals. Speaker 200:57:21And I think, Steve, I would add to the can't underestimate the power and the value to the customer of a reliable fluid gateway. Now that gateway is a single line gateway only growing stronger with more capacity. The alternative the competitive alternative is very congested way that's much more complex because you've got 3 railroads involved as opposed to 1. Just by nature, the complexity adds additional risk to the supply chain. So in these times, with a competitive alternative, it's challenged as it has been challenged, it even makes the value proposition for our route even more compelling. Speaker 300:58:03Makes sense. Appreciate the color. Speaker 200:58:07Thank you. Operator00:58:07Your next question comes from Ravi Shanker from Morgan Stanley. Speaker 300:58:12Thanks, everyone. So just a follow-up, our surveys have shown a shift by customers towards the MMX service in recent months. Is that just maturation of the offering since you launched it? Or has something changed recently with your commercial and go to market strategy there? Ravi, I think you called it right. Speaker 300:58:39It is a maturation. It's going through the sales cycle and process. It's going through I'll give you an example. We have one customer that we literally tested one box a day for 45 straight days. And they every day measured our performance on a per box basis to see if we could deliver what we said we were going to do. Speaker 300:59:03And I'll tell you the good news is we did exactly what we said we were going to do and they rewarded us with a significant piece of business. That's actually starting up as we speak. So I do believe it's a natural progression. I've had it doing it in the face of the sort of trucking challenge and the headwinds of all the capacity in that quarter that's out there now has been a little bit of surprise and more of a challenge than I anticipated. I'm pleased with the work our sellers have done. Speaker 300:59:39Schneider, our partner in that corridor has really worked hard and performed quite well. And when you begin to now be able to expand your sales offering with a product such as Emergent Speedway either to the NS or the CSX now, with this transaction just kind of continues to open up the portfolio of options we can offer shippers. So I continue to be optimistic that you're going to you'll see more of a step function of growth in that train pair. Speaker 801:00:19Very good. Thank you. Operator01:00:22Your next question comes from Ari Rosa with Citigroup. Please go ahead. Speaker 301:00:33Ari? Operator01:00:39Ari, your line is open. We'll go next to Benoit Poirier from Desjardins Capital Markets. Speaker 601:00:53Yes. Thank you very much and good evening everyone. Obviously labor issues have been very topical this year. When we look at the volume in Mexico, we've seen a great cross border activity level. So I was wondering whether there was any pull forward in demand with respect to the U. Speaker 601:01:13S. Election. And also, John, you've been able to quantify that labor issues impacted RTM by about 3% during Q3 that got lost. So was just wondering about whether you see opportunity to recover and maybe the latest discussion with shippers, retailer about the opportunity to get back this volume on the network? Speaker 301:01:42Benoit, so maybe just a couple of comments there. I do believe we saw a fair amount of pull forward, but maybe not on a North South product, but ahead of our labor stoppage in just ahead of that in August, July August. Now, I think it normalized. And as I said, actually we've seen now as we move into October on that domestic intermodal front, I think a little bit of an uplift in our volumes or transload volumes and we're optimistic at least the customer feedback seems to be that we're going to see that continue to close out the year. The 3% RTMs related to the strike, I think the good news is the bulk of that business was our bulk business. Speaker 301:02:43It was products, coal, grain, opportunities like that that simply will roll forward. And it's part of the reason why I when I say we've got record demand for coal in Q4, we got record demand for potash in Q4. Part of that is that roll forward, so it's not lost. Now certainly, we lost some domestic intermodal in that, but I think that's kind of washed itself out of the system already. And as I said, we've actually seen a little bit of pickup in that volume. Speaker 301:03:17So I'm not that was the impact over those days. I'm not I don't have any concerns. There's plenty of trade out there for us to close the year from. Speaker 601:03:29That's great color, John. Thank you. Operator01:03:33Thank you. And we have run out of time. So I will now turn the call back over to Mr. Keith Krill. Speaker 201:03:40Thank you, listen. Appreciate the time this afternoon sitting with us and discussing our results. I hope you would definitely agree what you've heard and spot at the macro, we continue to be a very unique value creating story at CPKC outpacing the industry's growth, most importantly, bringing it to the bottom line safely and efficiently. We've created a premium network unparalleled in our industry with new growth opportunities this team has and will continue to convert it, creating unique value for our shareholders. Stay tuned for our Q4 results. Speaker 201:04:16Thank you. Operator01:04:20Thank you. And that concludes today's conference. We appreciate your participation and please have a wonderful day.Read morePowered by Conference Call Audio Live Call not available Earnings Conference CallCanadian Pacific Kansas City Q3 202400:00 / 00:00Speed:1x1.25x1.5x2x Earnings DocumentsSlide DeckInterim report Canadian Pacific Kansas City Earnings HeadlinesCanadian Pacific Kansas City Limited (CP): Among The Best Railroad Stocks To Buy According To BillionairesApril 27 at 6:55 AM | insidermonkey.comCanadian Pacific: 2025 EPS To Grow Double Digits Regardless Of Potential Tariff OutcomesApril 25 at 12:00 PM | seekingalpha.comNow I look stupid. Real stupid... I thought what happened 25 years ago was a once- in-a-lifetime event… but how wrong I was. Because here we are, a quarter of a century later, almost to the exact day, and it’s happening again. April 27, 2025 | Porter & Company (Ad)Raymond James Has Pessimistic Outlook of CP Q3 EarningsApril 25 at 3:11 AM | americanbankingnews.comRoom to Grow: CPKC designates nine Site Ready industrial development locationsApril 24 at 4:05 PM | prnewswire.comCPKC EVP and CMO John Brooks to address the Bank of America Industrials, Transportation and Airlines Key Leaders Conference on May 14April 24 at 10:59 AM | prnewswire.comSee More Canadian Pacific Kansas City Headlines Get Earnings Announcements in your inboxWant to stay updated on the latest earnings announcements and upcoming reports for companies like Canadian Pacific Kansas City? Sign up for Earnings360's daily newsletter to receive timely earnings updates on Canadian Pacific Kansas City and other key companies, straight to your email. Email Address About Canadian Pacific Kansas CityCanadian Pacific Kansas City (NYSE:CP), together with its subsidiaries, owns and operates a transcontinental freight railway in Canada, the United States, and Mexico. The company transports bulk commodities, including grain, coal, potash, fertilizers, and sulphur; merchandise freight, such as forest products, energy, chemicals and plastics, metals, minerals, consumer products, and automotive; and intermodal traffic comprising retail goods in overseas containers. It also provides rail and intermodal transportation services over a network of approximately 20,000 miles serving business centres. The company was formerly known as Canadian Pacific Railway Limited and changed its name to Canadian Pacific Kansas City Limited in April 2023. Canadian Pacific Kansas City Limited was incorporated in 1881 and is headquartered in Calgary, Canada.View Canadian Pacific Kansas City ProfileRead more More Earnings Resources from MarketBeat Earnings Tools Today's Earnings Tomorrow's Earnings Next Week's Earnings Upcoming Earnings Calls Earnings Newsletter Earnings Call Transcripts Earnings Beats & Misses Corporate Guidance Earnings Screener Earnings By Country U.S. Earnings Reports Canadian Earnings Reports U.K. Earnings Reports Latest Articles Markets Think Robinhood Earnings Could Send the Stock UpIs the Floor in for Lam Research After Bullish Earnings?Texas Instruments: Earnings Beat, Upbeat Guidance Fuel RecoveryMarket Anticipation Builds: Joby Stock Climbs Ahead of EarningsIs Intuitive Surgical a Buy After Volatile Reaction to Earnings?Seismic Shift at Intel: Massive Layoffs Precede Crucial EarningsRocket Lab Lands New Contract, Builds Momentum Ahead of Earnings Upcoming Earnings Cadence Design Systems (4/28/2025)Welltower (4/28/2025)Waste Management (4/28/2025)AstraZeneca (4/29/2025)Mondelez International (4/29/2025)PayPal (4/29/2025)Starbucks (4/29/2025)DoorDash (4/29/2025)Honeywell International (4/29/2025)Regeneron Pharmaceuticals (4/29/2025) Get 30 Days of MarketBeat All Access for Free Sign up for MarketBeat All Access to gain access to MarketBeat's full suite of research tools. 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There are 10 speakers on the call. Operator00:00:00Good afternoon. My name is Marjorie, and I'll be your conference operator today. At this time, I would like to welcome everyone to CPKC's Third Quarter 2024 Conference Call. The slides accompanying today's call are available at investor. Cpkcr.com. Operator00:00:15All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I would now like to introduce Ashley Thorne, AVP, Investor Relations to begin the conference call. Speaker 100:00:35Thank you, Marjorie. 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 materially. The risks, uncertainties and other factors that could influence actual results are described on Slide 2 in the press release and in the MD and A filed with Canadian and U. Speaker 100:00:56S. Regulators. This presentation also contains non GAAP measures outlined on Slide 3. Please note, in addition to our regular quarterly financials, there's supplemental Q3 combined revenue and operating performance data available at investor. Cbkcr.com. Speaker 100:01:15With me here today is Keith Creel, our President and Chief Executive Officer Nadim Belani, our Executive Vice President and Chief Financial Officer John Brooks, our Executive Vice President and Chief Marketing Officer and Mark Red, our Executive Vice President and Chief Operating Officer. The formal remarks will be followed by Q and A. In the interest of time, we would appreciate it if you limit your questions to 1. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel. Speaker 200:01:43Thank you, and good afternoon. Thanks for being with us today to discuss and review our Q3 'twenty four results. I'm pleased to share the results of our 20,000 strong CPKC family. I can tell you the body of work in what was a very challenging operational quarter with a significant derailment that Mark and the team faced in early July and the strike in August, Both of which they did an exceptional job doing it. They bounced back and the network responded well as a result following up and getting back in sync. Speaker 200:02:13In spite of the challenges, I'll tell you we're proud to say we remain on track to deliver full year guidance, double digit earnings growth, including volume growth, which is better than what we had projected earlier in the year. So specific to the results for the quarter, the CPQC family delivered revenues of $3,500,000,000 which is up 6%, strong volume growth, an increase of over 4% and operating ratio of 62.9%. Earnings per share of $0.99 which was an increase of 8%. Most importantly, from a safety perspective, continued improvement, the training actions decreasing 17%, personal injuries decreasing 8%. On the operating front, continued strong performance across the network, which Mark will provide a bit of color to, but I'd like to specifically recognize the operating team specific to those challenges with the strike. Speaker 200:03:03They did an exceptional job in preparing for and bouncing back from the audits that we experienced as a result of the strike. Commercially, John and his team as well continue to generate industry best sustainable, profitable growth. We're delivering unique products to the market with a strong service offering to our customers that's reflected in the results that we're going to share with you today. The ANR, that's another exciting development over the quarter. I'm pleased that we received approval last week from the SDB for our new direct connection with the CSX in New Mexico, Texas and the U. Speaker 200:03:36S. Southeast over the MVNR corridor. I'd like to specifically again thank the SCB for their thorough review and approval of this full competitive transaction. The new interchange that we're establishing with CSX is going to provide a new competitive rail service to rapidly grow markets. It's going to bring new solutions to our customers and take trucks off the road. Speaker 200:03:57It's another example again of this unique growth story that the CPKHC franchise is delivering. On the hydrogen locomotive front, another milestone reached in the quarter. When it comes to our hydrogen locomotive program in early September, I'm very pleased to say that our first high horsepower hydrogen locomotive along with the fuel tender joined the consist of 3 diesel locomotives in fully loaded bulk train in our Western Canada corridor. Certainly an impressive achievement for demonstration again of this company's commitment to leadership and sustainability. But let me say in closing, I'm proud of the results teams produced. Speaker 200:04:35We're off to a strong start in Q4. We're in a great position for a strong finish to 'twenty four and an even more exciting transition into 2025 and momentum. With that, I'm going to hand it over to Mark to provide some comments on the OpEx performance, John provides color on the markets and then Dean will wrap up elaborating on the numbers. Speaker 300:04:54Okay. Thank you, Keith, and good afternoon. Looking at the quarter, I'm extremely proud of our railroaders for the continued hard work to be safe and reliable service. In the Q3, we continue to drive strong year over year operating improvements. If I look at the average terminal dwell, declined 8%, average train speed increased by 6%, locomotive productivity improved by 8%, and just to round off the fuel efficiency improvement by 2%. Speaker 300:05:25Automobiles are results demonstrating an efficient fluid resilient network that is delivering strong service to our customers. These results are particularly impressive given the challenges we faced in the quarter. I'm proud of the resiliency this network and team has displayed. As Keith mentioned, we navigated through a 4 day work stoppage bridge across our Canadian operations. And thanks to the hard work and preparation of the team, I'm pleased to say that we have a quick, efficient transition back to normal operations. Speaker 300:05:54I'll be frank, it was probably one of the best that I've seen in my career as we started this network back up. And you can contribute this to the operating team working closely with the customers and rail partners to minimize the interchanges and disruptions that we see as an operating team. But the work stoppage behind us, we're well to deliver to continue delivering the growth that we are needed that we are committed to and strong service that our customers expect. Thank you to all the railroaders who contributed to this outcome. Looking at safety for the quarter, if I look at FRE train accident frequency at 1.27, that is 8% improvement year over year. Speaker 300:06:32If I look at the personal injuries, we were 0.85%, which is 17% year over year improvement. I'm pleased with these results and the safety of the journey. We will always strive for further improvement. We also continue to execute on a number of initiatives that are improving efficiency and operating performance. The engineering team in coordination with the operations has improved in efficiency significantly reducing slow orders across the network and also train delays. Speaker 300:07:00Part of the leverage data from the investments in autonomous geometry testing curves to help us accurately plan in preventive maintenance and capital investments. Looking forward, there are additional benefits to realize these investments as we deploy these cars across our network, but specifically in New Mexico as well. And as we continue to make interoperability upgrades to the CP or excuse me, the legacy KTS fleet, so we can lead trains in Canada, by end of the year, we'll have about 175 upgraded locomotives to be fully interchangeable across the North American network. Looking at capital, we're executing to our plan to support safe and sustainable growth through the investment of the network. In the 1st three quarters, we have in service 6 new signings as part of the $275,000,000 merger commitment capital commitment. Speaker 300:07:55Two signings will be targeted by the end of the year, along with a capital project in and around Kansas City area that will come online this year as well. Capacity in Kansas City will further help us align and streamline the connection between the 2 networks, 2 legacy networks improving the service through this key quarter. We've also in service new sidings in Mexico along with crossovers and tractor alignment in our Escobedo yard, improving our capacity and fluidity in a key and growing segment of our network. Additionally, sidings and other investments in Mexico Capacitors are on the way, scheduled to go into service in Q4. These projects are targeted to improve the efficiency of our local and guard operations so we can run mainline trains while we serve customers, clearing the mainline increase in the throughput. Speaker 300:08:43Finally, I'm pleased to announce we're still on time with the Laredo Bridge. 2nd span will be opened by the end of the year. Before I turn it over to John, I'd like to share my enthusiasm for the first phase of our high horsepower hydrogen locomotive test completed in Q4. This is a tremendous accomplishment. It's the result of a lot of hard work and dedication to objectives. Speaker 300:09:08In summary, we're operating safely and efficiently. The network is in excellent shape. Our investments are creating capacity. We have a strong momentum hit in the Q4. With that, John? Speaker 300:09:20All right. Thank you, Mark, and good afternoon, everyone. I'm extremely pleased with the top line performance the team delivered despite the work stoppage in the quarter. We are creating and delivering on the unique opportunities, the strong service product we have and we're pricing to the value of the capacity of our service. Now looking at our results, this quarter we delivered freight revenue growth of 6% on a 4% increase in RTMs. Speaker 300:09:48This performance was despite the 4 day work stoppage that Keith and Mark spoke to, and this was a 3% headwind to RTMs in the quarter. Our cents per RTM was up 2% with strong pricing partially offset by mix. Now taking a closer look at our 3rd quarter revenue performance, I'll speak to the FX adjusted results, starting with both. Grain revenues were up 10% on 7% RTM growth. U. Speaker 300:10:15S. Grain volumes grew 11% percent RTM growth. U. S. Grain volumes grew 11% over the prior year. Speaker 300:10:23Our franchise is benefiting from strong production in our growing regions and increasing shipments to Mexico as we connect new markets and create new opportunities for our grain customers. Canadian grain volumes grew 3% with increased wheat to Mexico and the ramp up of harvest across the Canadian prairies. Now looking forward, we expect Canadian grain production in line with our 5 year average and our comps in Q4 and early 2025 are favorable as farmers held on to their crop a year ago. Now that favorable volume setup coupled with regulated grain pricing of approximately 6.5% has us well positioned in Canadian grain. So looking ahead for grain as a whole, we are working closely with our customers across all three countries and expect to deliver strong grain results into Q4 and well into 2025. Speaker 300:11:22In potash, revenues were up 7% on a 20% volume growth. We moved higher volumes of potash with Canpotek to the Portland terminal as demand remained solid and we lapped the shiploader outage in the ILWU strike last year. Since our work stoppage this quarter, the potash supply chain has normalized and demand for export potash service is at an all time high. Coal revenue was up 8 percent on a 2% decline in volume. Lower natural gas prices weakened demand for U. Speaker 300:11:58S. Coal and the strike impacted our Canadian coal shipments to Vancouver and Thunder Bay. Now as we move into Q4, we've seen both of these supply chains stabilize resulting in increased coal volumes on our network. Moving over to merchandise. Energy, Chemicals and Plastics revenue grew 10% on 6% volume growth. Speaker 300:12:20Volume growth in the quarter was across multiple commodities driven by our self help initiatives, synergy wins and more market share gains. Now looking at Q4, with the ongoing ramp up of these business wins and growing demand for LPGs, we are set up for a solid year end for ECP. Forest Products revenues and volumes were both down 1%. This is an area that continues to be impacted by a soft macro environment and we are experiencing pressure on our Facebook business. We are able to partially offset these impacts with our unique synergy growth and our extended length of haul. Speaker 300:13:02We are focused on what we can control in this area and the unique opportunities that this franchise unlocks. I'm confident that we are going to be in a position and strength as the construction and paper markets rebound in the future. Metals, Minerals and Consumer Products revenue was down 3% and 8% volume decline. Now much like the forest products area, the softer macros impacting our base business in this area, along with lower volumes of frac sand and from a steel facility in Mexico as it slowly ramped back up following a labor disruption. Moving to the automotive area. Speaker 300:13:43This business segment produced another record quarter with revenue up 27% on a 37% volume growth. This franchise continues to benefit from our closed loop service that we introduced shortly after control of the KCS and is developing longer haul volumes across our network. Our new Dallas auto compound along with other investments in auto racks and expanding our Chicago compound has helped us to deliver an entirely new supply chain model for the OEMs, giving them new competition, service and capacity certainty like they've never had before. Now looking forward, we expect our auto business to continue to drive differentiated growth as we benefit from these gains and the opportunity to compete for new business in the years ahead. On the intermodal side, revenue was down 5% on a 2% volume growth. Speaker 300:14:46Starting with domestic intermodal, volumes were down 7% impacted by lower short haul business in Mexico that was demarketed late last year and the work stoppage as customers temporarily shifted some of their business to trucks. This decline was partially offset by growth on our MMX 180, 181 cross border service, which continues to perform extremely well in an otherwise very challenging domestic market. Now looking forward, we have a strong pipeline of opportunities in this area, including wholesale, retail shipments and also our temp controlled service offerings. I'd like to also take this opportunity to share my enthusiasm for the FPD's approval of our MNBR transaction. This is just one example of the several unique opportunities that we are developing, which will continue to offer new optionality in a routing efficiency for many of our customers. Speaker 300:15:50On the international intermodal front, volumes were up 12%, primarily due to onboarding our new contract with O and E that started up in June and lapping the impact of our port strike a year ago. In this space, we are excited as ever about our opportunity to grow our international cross border service out of Lazaro. More to come as we move into 2025, but we are expanding the scope of our test shipments with a number of key customers who are interested in creating diversity and adding more resiliency into their supply chains. So to close, volumes came in better than expected, excluding the impact of our work stoppage. And I'm very pleased we are in a position to improve our RTM outlook to mid single digits for the year. Speaker 300:16:40And while the macro certainly remains challenging in a few areas, we continue to have line of sight to unique growth opportunities from synergies, self help and strong pricing. Our outlook is supported by the reliable and resilient service that Mark spoke to and that our operating team across 3 countries continues to deliver. And I'm very excited of what we have accomplished so far this year and will continue to accomplish in the years ahead. With that, I'll pass it over to Thanks, John, and good afternoon. This quarter was marked by strong core performance and the continued execution of our unique strategy that is delivering disciplined growth. Speaker 300:17:22I'd also like to thank our best in class team of railroaders whose continued focus on and execution deliver these results despite challenges in the quarter. Now looking at our results on Slide 12, PPKC's reported operating ratio was 66.1% and the core adjusted combined operating ratio came in at 62.9%. Diluted earnings per share was $0.90 and core adjusted combined diluted earnings per share was $0.99 up 8% from prior year. Taking a closer look at our expenses on slide 13, I will speak to the year over year variances on an FX adjusted basis. Comp and benefits expense was $644,000,000 or $640,000,000 on an adjusted basis. Speaker 300:18:12The year over year increase in comp and benefits was driven by higher stock based compensation along with inflation and volume driven increases from higher GPMs. This increase was partially offset by efficiency gains from reduced overtime, improved train weight, improved crude utilization and other productivity gains as we continue to optimize the combined network. Looking to Q4, we continue to expect average head count to be roughly flat on a year over year basis, driving further labor productivity gains as we grow volumes, particularly at bulk. Fuel expense was $419,000,000 down 2 percent year over year. The decline was driven by lower fuel prices and a 2% improvement in fuel efficiency from running longer and heavier trains, which resulted in $8,000,000 in P and L savings for the quarter. Speaker 300:19:04These savings were partially offset by volume driven increases from higher GTMs. Material expense was $99,000,000 or $98,000,000 on an adjusted basis. The year over year increase was driven by higher locomotive maintenance from increased fleet utilization along with higher GTMs and inflation. We also in sourced the locomotive maintenance contract in the quarter, which resulted in incremental material expense, but a favorable offset within purchase services and other for net savings in the quarter. Within rents were $89,000,000 down 4% year over year. Speaker 300:19:40The decline was driven by higher receipts from increased participation in the fleet pool, reduced car hire payments along with efficiency gains from improved cycle times and increased network velocity partially offset by inflation. Depreciation and amortization expense was up 4% year over year resulting from a higher asset base. Purchased services and other expense was 6 $23,000,000 or $599,000,000 on an adjusted basis. The line was impacted by lapping insurance proceeds received in Q3 2023 as well as higher in quarter casualty costs and inflation. These increases were partially offset by reduced intermodal services expense, efficiency savings and in sourcing synergies and savings on insurance renewals. Speaker 300:20:34I am pleased to see continued efficiency and synergy gains. We expect these gains along with the impact of lower inflation to be sustainable and continue improving our cost structure going forward. As we move below the line on Slide 14, other components of net periodic benefit recovery was $89,000,000 in Q3, reflecting a lower discount rate compared to 2023. Net interest expense was $192,000,000 or $188,000,000 excluding the impact of purchase accounting. The decline was driven by reduced debt balance. Speaker 300:21:08Income tax expense was CAD262 1,000,000 or CAD295 1,000,000 on a core adjusted combined basis. We now expect to see BKK core adjusted effective tax rate to be approximately 24.75 percent for the year. Turning to slide 15, we are generating strong cash flow with cash provided by operating activities of RMB1.272 billion in Q3. Capital investments and safety and growth remain our priority. In this quarter, we reinvested $748,000,000 in line with our continued expectation to invest approximately $2,750,000,000 in 2024. Speaker 300:21:51As Mark discussed, we continue to make strategic investments in capacity across our network, positioning us to continue officially absorbing the growth that this merger has enabled. We generated CAD523,000,000 in adjusted combined free cash flow and continue to repay debt. Our leverage ratio is 3.1 times and we still expect to reach our target leverage of 2.5 times in early 2025, at which point we will evaluate shareholder returns with our Board. In review of the quarter, the team continues to deliver industry leading volume growth along with continued discipline on price and cost controls. The net impact of the work stoppage was 100 basis points headwind to the quarter, primarily driven by the loss in revenue from temporary diversion and supply chain delays. Speaker 300:22:41That event, along with higher casualties and stock based comp, combined for a 300 basis points or 0 point 11 dollars year over year headwind to Q3 operating ratio and EPS respectively. As all of these impacts were isolated in the quarter, we believe that we are well positioned for sequential and year over year OR improvement in Q4. Strong core performance puts us well on track to deliver double digit core adjusted combined earnings growth in 2024 and mid single digit volume growth, which is an improvement from our view at the beginning of the year and industry leading. This all adds up to strong positive momentum as we head into 2025 and feel good about the opportunities that we have ahead of us. With that, let me turn things back over to Keith. Speaker 200:23:26Okay. Thanks, Hadeem, John, Mark. Operator, let's open it up for Operator00:23:44Your first question comes from Chris Wetherbee from Wells Fargo. Please go ahead. Speaker 300:23:50Yes. Hey, thanks. Good afternoon. Maybe if I could start like kind of higher level, Keith. I was kind Speaker 400:23:56of curious if I could get your take on what we've seen coming out of Mexican legislation potentially about some rail reform down there. I want to get a sense of how you guys are thinking about that. Is it something we should be concerned about from a risk perspective? Speaker 200:24:08Yes, great point, Chris. I think the best way to kind of summarize the way I feel about it is encouraged. We had some progress, had some face to face meetings and clearly understood the mandate from the previous government. I would say that at this point everything that's happened with the new President has only reinforced that and in fact expanded upon that. I was very encouraged to hear a couple of weeks ago, I guess it was on a Sunday at Quechua which is where the aspirational passenger training would be destined to from Mexico City along our right of way. Speaker 200:24:42The President announced that not only have they committed in our platform, but the vision is protect freight, create a dedicated corridor for 2 passenger tracks in the adjacent right of way. So I think it uniquely complements the other thing I'm very encouraged by. It's her commitment to the environment. In her comments relative to the need to get trucks off the road to create additional highway capacity, be friendly with the environment and bring additional business to the railway. So we are part of the solution and as long as they're part of the solution, I think with a very sovereign country that's focused on growth and being part of a strong 3 continent commerce system, I think you're in a good spot. Speaker 200:25:26So again, encouraged. Speaker 300:25:30Okay. That's helpful. And just one point of clarification, just Nadeem, Speaker 400:25:34you talked in the short term about some improvement both sequentially and year over year and the operating ratio in the Q4. Speaker 300:25:40I don't know if maybe you could put a little bit of a finer point on some Speaker 400:25:42of the opportunity here because obviously RTMs seem like they're ramping back up, there's grain opportunities in the Q4 that could be probably accretive from an OR perspective. Any other incremental thoughts we should be thinking about for the Q4 specifically? Speaker 300:25:55Yes. So we had that labor disruption that had 100 basis points headwind to the Opel OR in Q3. Obviously, we had a very unfortunate drill in Bordelac, North Dakota that was about $60,000,000 expense hit. And so those are 2 unique items. Stock based comp was a big headwind in Q3. Speaker 300:26:19So when I look at kind of those one time items not occurring again in the Q4 and I look at the opportunity for operating leverage, grain has started off quite strong. We had a robust crop ahead of us. We got a strong bulk of look at the whole. If you factor all of that together and the ability to move at a low incremental cost, I mean, Chris, I believe that we have the opportunity sequentially to have a 500 basis point improvement in the OR. So stay tuned. Speaker 300:26:53Appreciate the time. Thank you. Operator00:26:55Thank you. And your next question comes from Walter Spracklin from RBC Capital Markets. Please go ahead. Speaker 500:27:02Yes. Thanks very much, operator. Good afternoon. So I'd like to talk Speaker 600:27:05a bit about your volume growth here. I mean, you increased your projection here on expectations for this year. Just curious, this is on a backdrop of still weak macro environment. So presumably, you're getting a lot of kind of esoteric volumes here. Can you talk a little bit about those? Speaker 600:27:24And in particular, is it causing you to somewhat rethink your 28 targets of $1,500,000,000 revenue synergy on the upside or even your $5,000,000,000 kind of revenue pipeline, as you've seen a little bit more opportunities and what's developing on this new network? Are you seeing upward revisions to that kind of outlook? Speaker 300:27:52Well, maybe I'll start. Walter, thanks for the question. Focusing on the near term, as the team has already spoke about, our bulk franchise is very encouraging. Not only do we have a strong Canadian grain crop that I think is sort of well known and moving well, But we also have a really strong crop not only in our Upper Plains, North Dakota, Minnesota region, but also down in the Missouri, the legacy KCS region. So really, I'm going to say the perfect storm as it relates to grain and opportunities to move a lot of freight in that space at low incremental margins. Speaker 300:28:38Now if you look beyond that in the bulk, we've got, as I said, Mosaic and others had in Q3 On the domestic front, we have a really strong domestic pull right now also. So I feel really good about the fertilizer and potash space. And frankly, we have some catch up to do with Elk Valley and our coal opportunities, not only in Canada, but also a fair amount of maybe stronger demand on our some of our legacy coal franchise in the U. S. So the bolts are set up well. Speaker 300:29:25We've seen an uptick in our domestic intermodal business across Canada and we continue to perform well in our new MMX service. I think the last I look, if you kind of neutralize for some of the headwinds on the business that left our network, we're up 27% I believe on the year and growth on that training. So good outlook there. International Intermodal, frankly since COVID it's been tough to really tell how those international Intermodal volumes will move up and down. But the lineup right now to close out the year with our customers continues to look strong. Speaker 300:30:13And in fact, we're seeing some really good growth out of Porto St. John with our services out there. So I feel pretty decent about the intermodal area. As I said, we're going to continue to battle in some of those merchandise and forest products areas for the foreseeable future. But I think what makes us unique and maybe to your part of your question is, there's so many extended length of haul and new business development opportunities in the ECP ECP space to leverage this franchise and frankly in the merchandise and forest products space also that we've been able to, I would say maybe outpace the industry a little bit in those areas. Speaker 300:31:01And what gives me comfort is we start to see any sort of rebound in some of those macro areas. And I think it's going to be quite a tailwind. So all that to say, I feel comfortable with we sit roughly around 4% RTMs year to date right now. I see the demand out there to improve on that as we move through the final couple of months of the year, work hard with our customers and the supply chains to make that happen. And frankly, I certainly believe Walter, the future is bright as I look into the future and what 2025 and beyond looks like. Speaker 300:31:47But I think I'll leave it at that in terms of what our outlook is in those out years. Speaker 600:31:54Great color. Appreciate it, John. Speaker 300:31:56Yes. Operator00:31:57Thank you. Your next question comes from Jon Chappell from Evercore ISI. Please go ahead. Speaker 300:32:04Thank you. John, I'm going to stick with you. From when we measure yield, whether it's revenue per RTM or revenue per carload, the numbers look pretty strong. So just generally on kind of core pricing momentum, but also I just wanted to highlight auto and intermodal from a revenue per RTM perspective, a little bit of pressure there. Was that a Speaker 200:32:25length of haul issue? Was that Speaker 300:32:26a new service kind of mark to market? Or were there any kind of more extreme competitive pressures in those segments that maybe had them lag the core portfolio? Yes. Thanks, John. You nailed it. Speaker 300:32:40I'll give you the stats. Our automotive lane to haul in the quarter was up 17% and our intermodal lane to haul about 20%. So that is exactly what you saw in those numbers. As a whole, I would say, I'm confident to say that we're this team is taking out of the park in terms of pricing for the value of the service and the capacity that this network has. I'm super pleased with our year to date performance. Speaker 300:33:11And just be candid, we're actively running north of 5% in a lot of those discussions and outcomes with those contracts. And what makes me feel good about that is as we do that, that gives us a nice tailwind as you think about 2025 and what our same store looks like. Now, there's no doubt there's certain areas where we're feeling more pressures and certainly the intermodal space with all the trucking capacity and the cheaper spot rates for trucks. That has been a little more challenging. But lastly, we start to see a little bit of tightening as we move into 2025 in that space. Speaker 300:33:58And honestly, there may be a little bit of catch up opportunity. I guess, maybe the last point, John, and I think this is important just to point out. As you look ahead into Q4, do know we are looking at a pretty significant fuel headwind as it relates to that sense for RPM, but that's maybe just something to keep an eye on. Helpful. Thank you, John. Operator00:34:28Thank you. Your next question comes from Fadi Chamoun from BMO Capital Markets. Please go ahead. Speaker 700:34:35Yes, good evening. Thanks. Kind of staying on the commercial side a little bit. So the Gemini Alliance, I think, announced some schedules. They start up their service in February. Speaker 700:34:49And we've noticed kind of they're highlighting 3 ports that you serve being part of their loops. And I was wondering if you have any insight into what this might mean or translate into your network or your share in that kind of life as we go into 2025? And kind of follow-up on some of the discussion earlier, like if you're not kind of prepared at this point to talk about volume growth guidance for 2025, can you give us an idea what you feel this synergy pipeline will look like as we progress into 2025? I think you said in the prior call $800,000,000 exit run rate for 2024. What does this look like 12 months from now, if you can provide any kind of insight into that? Speaker 700:35:39Thanks. Speaker 300:35:41Okay. So, there's a few pieces to unpack there, Fady. I'll start off with Gemini. Certainly, we have had a long standing and really, I would say strategic at the highest levels relationship with Hapag Lloyd, a tremendous amount of respect between our companies to grow, to expand our partnership where we can to be very strategic. So certainly, we feel very good about their prominence as part of that alliance. Speaker 300:36:20As you know, also we've expanded our relationship over the years, most recently with Maersk in the development of our Transload facility in Vancouver, where we utilized our land assets and built partner with them to build that facility. But also we've steadily grown our trust and our relationship with their ITI business, not only into Canada and down into the U. S. So naturally, I think we feel really excited about the Gemini opportunity. Frankly, their precision model that they want to deploy and how they deploy their ships and their assets and their port terminals really matches up philosophically with how Mark and Keith drive our rail with how Mark and Keith drive our rail operations on a daily basis. Speaker 300:37:15And I think that could yield a really positive strategic relationship. Now look, it's in the early days and we're working through what that's going to look like. But I just take, for instance, Lazaro and specifically to the synergies you were asking about. That scenario where it hasn't grown and that opportunity for cross border out of lateral, maybe hasn't grown as much as we initially thought or as fast as we initially thought. But with APM Terminals and making the investments they're making and I think the commitment Gemini has to grow that business, along with the investments that Hutchinson is making, we see a tremendous opportunity to begin to see that volume grow through that Lazaro terminal. Speaker 300:38:08I will mention to you, Lazaro is still the fastest growing North American port that's out there. I think year to date, 30 2% is the last I saw. Volumes are up. I can tell you our rail volumes are up 27%. Now again, majority of that is servicing domestic Mexico. Speaker 300:38:27But again, we are seeing a fair number of, I would say, singles and doubles as we expand that service. Maybe the last piece on Gemini, and I think this is worth mentioning is, with the investments that DP World has made at Port of St. John, it's really beginning to unlock that next step function of capacity at that terminal from the 300,000 Puu a year potential to 800,000 Puu a year with the development and addition of cranes at that port. So again, I think just another example of how we potentially believe the partnership and the expanded service calling into that port to generate growth in 2025. Specific to the synergies and the exit run rate, I continue to feel really good. Speaker 300:39:32Obviously, we only got a couple of months to go with our exit run rate of $800,000,000 to close out this year. I'm probably not allowed to give you any guidance beyond that into 2025. Other than that, I feel no reason why, if we keep doing the things we do, we execute on these business development opportunities, MNDR, the Lazaro and the Gemini. You'll begin to see our Maricold project in Kansas City and other locations unfold. We continue to gain momentum with our MMX service north south. Speaker 300:40:13I see no reason why we can't see that synergy number continue at the pace of growth that you've seen through the first, I guess, 2 years of our Speaker 700:40:25control. That's great. Thanks. Operator00:40:30Thank you. And your next question comes from Scott Group with Wolfe Research. Please go ahead. Speaker 500:40:36Hey, thanks. Afternoon, guys. So I don't know if this is for Nadeem or Keith. As I think back to the Analyst Day last year, you talked about a sort of multi year high single digit revenue, I guess, probably mid to upper teens earnings growth. And I think you told us 24 might be less than that, right, because you Speaker 700:40:55don't have the buyback yet. Speaker 500:40:57It sounds like the buyback is going to start next year. So I don't know, again, Nadine and Keith, any puts and takes we should be thinking about for next year that you know about at this point that make that algorithm more or less likely to play out? Speaker 300:41:16Yes, Scott. I mean, obviously, we'll give our formal guidance in January with our Q4 results. But I think you captured it well. Nothing is changing as far as our multiyear outlook. We're holding the line in terms of what we guided to last June, which was, as you said, high single digit revenue growth, double digit EPS growth, CapEx in that around 2.6 to 2.8 range. Speaker 300:41:43And as you said, we're not getting the benefits of the buyback now, but we should start seeing that benefit next year once we reinstitute a buyback program. So as I look at where we're exiting 2024, we know we've got a strong crop ahead of us. We know some of our key wins and synergy opportunities are going to give us a very idiosyncratic opportunity to grow and be an industry leader in growth again next year, I would fully expect. So, you can assume that what we guided to is we'll start hitting our stride in 2025. And so I have no reason why we shouldn't be able to hit what you just mentioned in terms of our 2025 numbers. Speaker 700:42:40Helpful. Thank you, guys. Operator00:42:44Your next question comes from Tom Wadewitz with UBS. Speaker 800:42:50Yes, good afternoon. Wanted to see, John, if you could give some thoughts on where you might be more optimistic in 2025 just in terms of which markets do you think can really continue to go strong and be drivers of growth? And then also, I guess, Mark made some comments at the beginning about some capacity investments that potentially enable you to I don't know if that creates more growth opportunity as you add some capacity, but just some thoughts about where should we be most optimistic in 2025 in terms of specific markets? Thank you. Speaker 300:43:31Yes, sure. Thanks, Tom. So I think 2025 could shape up, at least in my mind, a little bit how we're closing out this year in terms of I don't know what we're going to get out of the organic base book. If we're going to see a turnaround and rebound and some tailwind there, I'm certainly hoping for it, but we're not counting on it. This kind of is going to rinse and repeat in terms of self help initiative and over deliver the synergies. Speaker 300:44:07And it's really that lift that I just spoke to that excites me. I do believe there's opportunity for good growth in international intermodal, not only with Gemini as I spoke to quite a bit with other players. And now with our diversity across Vancouver, St. John and down in I think gives us a strong growth platform. Ramp up of MMX still get mark on me quite a bit that we're not running long enough trains on that service. Speaker 300:44:51And so I have a definite opportunity to continue to price into and fill up that North South service. Now the good news is I see a strong pipeline of opportunity on driving and on auto parts, on a whole variety of different items and we haven't even really scratched the surface on our refrigerated product. I'll remind you that that facility that Americold building will be up and running here, let's call it June, July of 2025. But I can also tell you we've been very candid about this is about creating an ecosystem. It's about creating a differentiated product in the marketplace that really can go after truck volumes that are moving today. Speaker 300:45:44So I see the opportunity as we move into 2025 to expand the number of terminals we have co located in this area. 2 or 3 or 4 more facilities, which again gives us that ecosystem that excites me. Maybe one of the last areas and we don't talk about a lot is our carload business, Tom. It's an area of kind of the world of singles and doubles, but again also really accretive in business to our portfolio. And the team there has done a great job as I think about how we expand our presence in the markets in Texas, particularly Dallas, how we continue to expand our fuels terminals in the Toronto and Eastern Canadian markets. Speaker 300:46:46And then also the ongoing demand that we're seeing really as you think about that Gulf region to grow our aggregate business down in there and creating transload and solutions to service those markets. So those are a few of the key ones. And I really didn't even mention autos, Tom, as you think about that area because we still have a lot of contracts out there that we'll be rolling over that we think we've got a really good service product to offer those OEMs. Speaker 800:47:22Great. That's very helpful. Speaker 300:47:26Yes. From a capital side, what I would say is, as John brings this business on, obviously, we still need to work on getting some of these local results on mainline where we can't pass drains. When we talked earlier, that's what we that's what we're focused on to make sure yard separations, local separations, we can continue to run an operation parallel with the road service. The biggest thing we'll hit end of this year is really double capacity of Laredo Bridge. KCS made that investment. Speaker 300:47:55We finished it. We'll bring it across the finish line here soon. And that will create a lot of capacity to get across the bridge, 181, 180 amongst other grains and other products that could come across as well. Another piece is really just Kansas City just as we treated it as 2 railroads years ago as we look at it today as one network. We don't want to drive everything into Kansas City. Speaker 300:48:18We want to create a path where we could bypass Kansas City for dwell purposes, for speed, for car miles, for car days. So working through those capacity changes as well. So, Jiveen can continue to grow the business, but we can serve the customers as they expect us to serve. Speaker 800:48:38Great. Thank you. Operator00:48:41Thank you. And your next question comes from Ken Hoexter with Bank of America. Please go ahead. Speaker 900:48:48Hey, great. Good afternoon. Nadeem, that was a great rundown before on the potential for 500 basis points sequential OR improvement. You talked about the 100 basis point impact. Can you clarify, you just went so quick, the 300 basis point impact. Speaker 900:49:01You just went there. I just want to make sure I understand the difference. And then my question for John is thoughts on potential for additional tariffs. If we get an administrative change here, your thoughts on imports to Mexico, Canada maybe cross border, how should we be thinking about this as we prep over the next few weeks? Speaker 300:49:21Yes. Ken, the year over year impact to stock based comp was part of the 300 basis points. And then we had a $50,000,000 increase year over year on derailment costs, dollars 60,000,000 came from 1 in particular in Board of LAC. So that combined with 100 basis points from the impact of the work stoppage is the full 300 basis points. Thanks. Speaker 300:49:52Yes, Ken. Look, it's a little bit of a wait and see obviously on how that's going to play out. Again, I'm really encouraged basis to the comments Keith made earlier around kind of the administration in Mexico staying aligned or maybe even double down a little bit here most recently around the desire to grow and to support commerce in Mexico to support North America. I kind of resting a little bit on the fact that whatever administration comes into play, I think commerce for North America is important. And ultimately, I think, whether you look back at the current administration or maybe the one previous to that, that is what won the day. Speaker 300:50:50USCMCA was obviously created during the first Trump administration. And ultimately turned into, I think, good piece of policy for the 3 countries. So we'll navigate it. Obviously, we're staying close with our customers on this file. We're going to be active, no doubt, with whatever government's in place in the U. Speaker 300:51:19S. And also in Mexico and Canada. And we'll navigate whatever those tariffs are may or may not look like as we move into the future. Speaker 900:51:35Great. Thanks, John. Speaker 300:51:37Thanks, Maggie. Operator00:51:39Your next question comes from Brian Ossenbeck with JPMorgan. Please go ahead. Speaker 900:51:46Yes, thanks. Appreciate you taking the question. So maybe just a couple of quick follow ups for John there. Would you say you've already felt some of the impact of this uncertainty with constitutional reform, the passenger rail, just the broader tariff question in the elections and the transition of both administrations in the U. S. Speaker 900:52:05And Mexico. I mean, foreign direct investment has been pretty soft for a little while. So do you think you've already felt and seen some of this and potential for it to improve when there's some certainty in terms of what the rules of the game are? And then just maybe more specific, it looks like there's been some trouble south of the border with your competitor handling some of the grain shipping over there. So you talked about a strong grain harvest and then a second bridge of the Rado. Speaker 900:52:28Do you think that's an opportunity for you guys to pick up some additional share given the circumstances? Thanks. Speaker 300:52:36It's hard to tell in terms of any sort of impact. We were talking about it actually prior to the call a little bit. There's so much activity that's been announced in Mexico to support the auto industry, plastics, appliances, white goods, that we continue to work through with those customers down there that present huge opportunities for our cross border shipments. It really gets tough for me to see, is there a marked slowdown or not? I think my answer is no. Speaker 300:53:19I really haven't seen any impact at this point. And actually just most recently, I can tell you we are down in front of some folks that just announced some recent production down in Mexico. And there was no apprehensiveness from them whatsoever in terms of moving forward with their investments. And that was for an investment coming into Mexico. So we're going to have to just see how that plays out. Speaker 300:53:46I think the fundamentals just continue to support a North American economy, continue to make sense. You mentioned about the grain, some of the grain challenges in that. Yes, I think we've certainly seen some opportunities migrate to our network. But I'll also tell you, and you've heard this from us a long time, we're not going to oversubscribe, we're not going to oversell. We're going to be very disciplined on what those opportunities look like. Speaker 300:54:15And that doesn't disciplined on what those opportunities look like. And that doesn't mean we're not willing to work with our other Class I partners because we certainly we are and we do. But I also want to make sure that if we we're going to take on some new business down in those lanes that Mark and his team can execute it. Because as we've said a number of times, building that trust with the customers is paramount. And once you burn them, it becomes a hard sell to get it back on your railroad. Speaker 300:54:51And then I guess last, you said the second bridge, you're darn right. I believe it's a huge sales tool. It is something that myself and my team and our team down in Mexico are making sure our customers understand that additional capacity lift that we're going to gain, that not only will continue to promote, I think, world class fluidity through Laredo, but also give us the capacity to grow and grow with certainty with those opportunities that I'm talking about. So that presents a significant opportunity for my team in the future. Very helpful. Speaker 300:55:36Thank you, John. Operator00:55:38Yes. Thank you. Your next question comes from Steve Hansen with Raymond James. Please go ahead. Speaker 300:55:46Yes. Thanks for your time, guys. John, I want to follow-up on your last comments on grain. I think you've spoken pretty positively to the North South grain movement here for the past 2 or 3 quarters now. It's obviously somewhat crop dependent. Speaker 300:55:58But how would you characterize your progress so far in Grain and establishing that new North South quarter or North South Lane that you've been trying to work on relative to maybe your initial expectations? Thanks. Yes. I'd say we're ahead of pace, a little bit on that front. If you just think about our makeup of synergies and grain that's coming off of the legacy CP network, terminating on the legacy KCS network. Speaker 300:56:24We're, I would say, ahead of pace. But nowhere to where I want to be on that front, Steve. I truly believe we're just scratching the surface in terms of creating optionality for those brain companies to sell into different markets like they've never had in the past. My CEO would always tell me, I would always complain that I didn't have enough grain markets for my shippers and we don't have that excuse now. We've got a really good service product to go into the South and into Mexico. Speaker 300:57:05So I'm super excited what 2025 can bring in that space in terms of not only grain out out of Canada, down in New Mexico, but across all of our Upper Plains terminals. Speaker 200:57:21And I think, Steve, I would add to the can't underestimate the power and the value to the customer of a reliable fluid gateway. Now that gateway is a single line gateway only growing stronger with more capacity. The alternative the competitive alternative is very congested way that's much more complex because you've got 3 railroads involved as opposed to 1. Just by nature, the complexity adds additional risk to the supply chain. So in these times, with a competitive alternative, it's challenged as it has been challenged, it even makes the value proposition for our route even more compelling. Speaker 300:58:03Makes sense. Appreciate the color. Speaker 200:58:07Thank you. Operator00:58:07Your next question comes from Ravi Shanker from Morgan Stanley. Speaker 300:58:12Thanks, everyone. So just a follow-up, our surveys have shown a shift by customers towards the MMX service in recent months. Is that just maturation of the offering since you launched it? Or has something changed recently with your commercial and go to market strategy there? Ravi, I think you called it right. Speaker 300:58:39It is a maturation. It's going through the sales cycle and process. It's going through I'll give you an example. We have one customer that we literally tested one box a day for 45 straight days. And they every day measured our performance on a per box basis to see if we could deliver what we said we were going to do. Speaker 300:59:03And I'll tell you the good news is we did exactly what we said we were going to do and they rewarded us with a significant piece of business. That's actually starting up as we speak. So I do believe it's a natural progression. I've had it doing it in the face of the sort of trucking challenge and the headwinds of all the capacity in that quarter that's out there now has been a little bit of surprise and more of a challenge than I anticipated. I'm pleased with the work our sellers have done. Speaker 300:59:39Schneider, our partner in that corridor has really worked hard and performed quite well. And when you begin to now be able to expand your sales offering with a product such as Emergent Speedway either to the NS or the CSX now, with this transaction just kind of continues to open up the portfolio of options we can offer shippers. So I continue to be optimistic that you're going to you'll see more of a step function of growth in that train pair. Speaker 801:00:19Very good. Thank you. Operator01:00:22Your next question comes from Ari Rosa with Citigroup. Please go ahead. Speaker 301:00:33Ari? Operator01:00:39Ari, your line is open. We'll go next to Benoit Poirier from Desjardins Capital Markets. Speaker 601:00:53Yes. Thank you very much and good evening everyone. Obviously labor issues have been very topical this year. When we look at the volume in Mexico, we've seen a great cross border activity level. So I was wondering whether there was any pull forward in demand with respect to the U. Speaker 601:01:13S. Election. And also, John, you've been able to quantify that labor issues impacted RTM by about 3% during Q3 that got lost. So was just wondering about whether you see opportunity to recover and maybe the latest discussion with shippers, retailer about the opportunity to get back this volume on the network? Speaker 301:01:42Benoit, so maybe just a couple of comments there. I do believe we saw a fair amount of pull forward, but maybe not on a North South product, but ahead of our labor stoppage in just ahead of that in August, July August. Now, I think it normalized. And as I said, actually we've seen now as we move into October on that domestic intermodal front, I think a little bit of an uplift in our volumes or transload volumes and we're optimistic at least the customer feedback seems to be that we're going to see that continue to close out the year. The 3% RTMs related to the strike, I think the good news is the bulk of that business was our bulk business. Speaker 301:02:43It was products, coal, grain, opportunities like that that simply will roll forward. And it's part of the reason why I when I say we've got record demand for coal in Q4, we got record demand for potash in Q4. Part of that is that roll forward, so it's not lost. Now certainly, we lost some domestic intermodal in that, but I think that's kind of washed itself out of the system already. And as I said, we've actually seen a little bit of pickup in that volume. Speaker 301:03:17So I'm not that was the impact over those days. I'm not I don't have any concerns. There's plenty of trade out there for us to close the year from. Speaker 601:03:29That's great color, John. Thank you. Operator01:03:33Thank you. And we have run out of time. So I will now turn the call back over to Mr. Keith Krill. Speaker 201:03:40Thank you, listen. Appreciate the time this afternoon sitting with us and discussing our results. I hope you would definitely agree what you've heard and spot at the macro, we continue to be a very unique value creating story at CPKC outpacing the industry's growth, most importantly, bringing it to the bottom line safely and efficiently. We've created a premium network unparalleled in our industry with new growth opportunities this team has and will continue to convert it, creating unique value for our shareholders. Stay tuned for our Q4 results. Speaker 201:04:16Thank you. Operator01:04:20Thank you. And that concludes today's conference. We appreciate your participation and please have a wonderful day.Read morePowered by