Release Date: January 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Canadian Pacific Kansas City Ltd (CP, Financial) reported a 3% increase in quarterly revenues to $3.9 billion and a 5% increase in full-year revenues to $14.5 billion.
- The company achieved a 160 basis point improvement in its operating ratio for the quarter, reaching 57.1%, and a 70 basis point improvement for the full year.
- CPKC was named GM Supplier of the Year for finished vehicles in 2024, highlighting its strong performance in the automotive sector.
- The company completed the construction of the second span of the Laredo Bridge, enhancing capacity and efficiency at the U.S.-Mexico border.
- CPKC achieved a 26% year-over-year improvement in personal injury frequency and led the industry with the lowest train accident frequency among Class 1 railroads.
Negative Points
- The company faced challenges such as work stoppages at the Port of Vancouver and adverse winter weather conditions, impacting operations.
- Potash revenues declined by 4% due to a 7% volume decline, affected by strikes and weather conditions.
- Coal revenue decreased by 3% with an 8% decline in volume, driven by a customer outage and weather impacts.
- International Intermodal volumes were down 1%, primarily due to labor disruptions at the Port of Vancouver.
- The company anticipates uncertainties in macroeconomic conditions and trade policies, which could impact future growth.
Q & A Highlights
Q: Can you provide more details on the RTM outlook and how it might be affected by new opportunities or core customer business?
A: John Brooks, Executive Vice President and Chief Marketing Officer, explained that they expect 2% to 3% growth from synergies and another 2% to 3% from organic business initiatives. The growth is expected to be more weighted towards the back half of the year, but they are off to a strong start. The bulk franchise, particularly grain, potash, and coal, is expected to perform well. Additionally, new services and partnerships, such as the CSX route, are anticipated to drive growth.
Q: How do you view the potential impact of trade policy changes on your mid-single-digit volume growth target?
A: Keith Creel, President and CEO, emphasized that while trade policy changes are uncertain, the company is focused on long-term growth and strategic investments. He noted that trade between the U.S., Canada, and Mexico is critical, and the company is well-positioned to benefit from this. Creel expressed confidence in achieving the higher end of their growth range unless significant volatility occurs.
Q: Can you discuss your expectations for inflation and the potential impact on pricing and buybacks?
A: Nadeem Velani, Chief Financial Officer, noted that inflation has moderated, particularly in non-labor areas, and they expect pricing to be in the 4% to 4.5% range. The company plans to return to share buybacks, with some impact expected in 2025, depending on timing. They have successfully deleveraged and are in a position to increase shareholder returns.
Q: How do you feel about the repeatability of disruptions like strikes and weather events in 2025?
A: Keith Creel stated that the disruptions in 2024 were episodic and not expected to recur in 2025. He highlighted recent labor agreements that provide stability and reliability, which should enhance the company's reputation as a reliable supply chain partner.
Q: Can you expand on the synergy capture and whether these opportunities will continue into 2026 and beyond?
A: John Brooks mentioned that the opportunity pipeline identified at Investor Day remains strong, and they are ahead of schedule in synergy capture. He expects to deliver an additional $300 million in synergies in 2025, with opportunities across all lines of business, including automotive, intermodal, and reefer services.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
