Company Reports

Canadian National and Canadian Pacific Kansas City implemented a worker lockout across Canada on Aug. 22 in response to a stalemate in labor contract negotiations with the Teamsters Canada Rail Conference, or TCRC. We are under the impression that the TCRC would have initiated a strike either way. This work stoppage is somewhat different than others because both railroads are simultaneously affected, which means some Canadian shippers (especially those needing to move commodities like grain and potash) will experience more of a headache than in the past.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a successful profitability turnaround. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network.

Wide-moat Canadian Pacific Kansas City's second-quarter pro forma revenue (combining CP and Kansas City Southern results) grew 8% year over year on a mix-driven jump in total yield (revenue per carload), as consolidated volume declined on softer coal and international intermodal activity. There were several crosscurrents this quarter, but revenue was mostly in line with our expectations.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a successful profitability turnaround. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network.

Wide-moat Canadian Pacific Kansas City's first-quarter pro-forma revenue (combining CP and Kansas City Southern results) grew 2% year over year on higher yields, partly offset by lower consolidated volumes. Revenue came in slightly shy of our expected run rate, but that's mostly because of coal activity, which should see some recovery.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a successful profitability turnaround. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, and rightsized the workforce and overall asset base.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a successful profitability turnaround. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, and rightsized the workforce and overall asset base.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a profitability turnaround that proved successful. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, and rightsized the workforce and overall asset base.

Wide-moat Canadian Pacific Kansas City's fourth quarter pro forma revenue, combining CP and Kansas City Southern results, grew 4% year over year, slightly ahead of our expected run rate on better-than-anticipated yields (revenue per carload). Volume was mostly in line and core carload pricing remains positive.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a profitability turnaround that proved successful. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, and rightsized the workforce and overall asset base.

Wide-moat Canadian Pacific Kansas City's third-quarter pro forma revenue (combining CP and Kansas City Southern results) fell 4% year over year, mostly due to persistent intermodal weakness, easing accessorial income, and lower fuel surcharges. Revenue missed our forecast on greater than anticipated intermodal and potash volume declines, which saw incremental pressure from the Canadian West Coast port strikes. We note that core carload pricing remains positive.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a profitability turnaround that proved successful. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, and rightsized the workforce and overall asset base.

Wide-moat Canadian Pacific Kansas City's second-quarter pro forma revenue (combining CP and Kansas City Southern results; merger finalized in April) fell 3% year over year, excluding foreign exchange. The decline was driven by lower overall volumes and now-falling fuel surcharges. Revenue came in shy of our forecast due to greater-than-expected intermodal deterioration.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a profitability turnaround that proved successful. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, cut the workforce by 40%, cut locomotives, and returned thousands of leased cars.

Canadian Pacific held an investor day during which management provided incremental color around the rail's long-term growth prospects following the Kansas City Southern merger, which creates nascent, seamless single-linehaul services from Canada and the upper Midwest down through Texas, the Gulf of Mexico, and into Mexico. Management called out an impressive multiyear revenue pipeline approaching USD 5 billion. Clearly, CP won't secure all of that (we understand it has line of sight into about USD 1 billion), but the magnitude gives us incremental confidence in the firm's revenue synergy goals for the newly combined networks (around USD 1.5 billion). Synergies reflect tangible opportunities to grab market share from competing rails and trucking (truck to rail conversions) and capitalize on a solid runway of industrial development projects, many of which should benefit from nearshoring trends to Mexico (automotive production, for example).

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a profitability turnaround that proved successful. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, cut the workforce by 40%, cut locomotives, and returned thousands of leased cars.

Wide-moat railroad Canadian Pacific's first-quarter revenue grew a solid 19% year over year (removing foreign exchange) on higher fuel surcharges, core rate gains, and surprisingly resilient volume expansion. Revenue came in ahead of our forecast on better-than-anticipated adjusted yield (up 10%) and volume (up 9%) gains.

The U.S. Surface Transportation Board announced that it has approved the merger of Canadian Pacific and Kansas City Southern. CP bought KCS in December 2021 for an implied enterprise value near $31 billion but placed the shares into a voting trust (with KCS run independently) pending regulatory approval. We'd been expecting STB approval, but there was incremental uncertainty recently, given political pushback on the deal following Norfolk Southern's East Palestine derailment. The press release said CP is reviewing the decision and "in the coming days will announce its plans with respect to the creation of CPKC [Canadian Pacific Kansas City]," but we expect the rail to take control of KCS on or around April 14, when permitted.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a profitability turnaround that proved successful. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, cut the workforce by 40%, cut locomotives, and returned thousands of leased cars.

Following the appointment of railroading legend Hunter Harrison as CEO in 2012, Canadian Pacific embarked on a profitability turnaround that proved successful. Initially upon taking the helm, Harrison closed numerous intermodal terminals and hump yards to rightsize the network. He also sold nonessential rail lines, turned over leadership, cut the workforce by 40%, cut locomotives, and returned thousands of leased cars.