Good afternoon, everyone. My name is Bo and I will be your conference operator today. At this time, I would like to welcome everyone to CPKC's First Quarter 2026 Conference Call. The slides accompanying today's call are available at Investor.cpkcr.com. I would now like to introduce Mr. Chris de Bruyn, Vice President, Capital Markets. Please go ahead, sir.

Thank you, Bo. 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. The risks, uncertainties and other factors that could influence actual results are described on Slide 2 in the press release and in the MD&A filed with Canadian and U.S. regulators. This presentation also contains non-GAAP measures outlined on Slide 3. With me here today is Keith Creel, our President and Chief Executive Officer; Nadeem Velani, our Executive Vice President and Chief Financial Officer; John Brooks, our Executive Vice President and Chief Marketing Officer; and Mark Redd, our Executive Vice President and Chief Operating Officer. The formal remarks will be followed by Q&A. In the interest of time, we would appreciate if you limit your questions to one. It is now my pleasure to introduce our President and CEO, Mr. Keith Creel.

Okay. Thanks, Chris, and thanks, everyone, for joining us on the call today. As always, I want to start by thanking our 20,000 strong family of railroaders across these 3 great countries that deliver the results we're honored to share with everyone today. So for the quarter, the team delivered revenues of $3.7 billion, volume growth 2% on an RTM basis. Operating ratio was 63% and earnings of $1.04. Overall, strong execution across the board operationally, commercially and financially, and they did this in a very dynamic environment. Certainly, the first quarter's results, we saw some impacts from volatile fuel and FX markets. That said, that tide has turned, and I'm very pleased with the underlying performance and our strong start in the second quarter. When I step back 3 years in our journey at CPKC, what gives me continued confidence is not just the quarter itself, but the trajectory that we're on as a network and as a company. On the operating side, the network again performed exceptionally well in the first quarter, building on our strong momentum from 2025, delivering first quarter operating results, record levels, reflecting continuous improvement we've seen since the merger. Productivity, velocity and asset utilization all continued to move higher, which tells me two things. First, the railroad is structurally better. And second, our people are executing with discipline each and every day. The gains are translating into better service capacity, improved efficiency, and that's exactly how we intend to continue to railroad. On the labor front and the safety side as well, I'm going to spend a couple of moments talking about our people. As we recently announced, reaching long-term tentative agreements with both SMART-TD and the BLET on the legacy KCS is a significant milestone for this company. These agreements improve quality of life for our railroaders while providing the operating stability we need to continue driving performance and service reliability in this key growth corridor. Looking at safety, our focus remains unwavering. We made progress on the personal injury side. And while train accident frequency increased from an all-time low last year, our fundamentals remain extremely strong. On the commercial side, the franchise performed very well. We delivered solid volume growth across the network led by the record grain and continued momentum from our unique North American footprint. The exceptional grain volumes were supported by record harvest and our ability to efficiently connect Canada, the United States and Mexico. Automotive, International, Intermodal and our MMX service also contributed. FX, mix and more macro factors pressured yields in the quarter of course. Regardless, pricing discipline remains strong. And as we move through the year, the yields have improved as comparisons normalized and market conditions became more supportive. On shareholder returns from a finance perspective with our balance sheet in a position of strength and the business generating strong cash flow, we announced a new share buyback program to repurchase up to 45 million shares. Yesterday, we announced a 17.5% increase to our quarterly dividend. We're certainly pleased to be in a position to continue returning cash to shareholders, particularly amidst a volatile market. So in closing, looking ahead, we feel very good about where we are. The network is running extremely well. Our unique growth drivers continue to remain firmly intact, comparisons improve through the year and most importantly, we have a team that knows how to execute and a franchise that continues to differentiate itself. We're going to remain focused on disciplined execution, strong service and delivering long-term value for our customers and our shareholders. Mark, over to you.

Yes. Thank you, Keith, and good afternoon. I want to start by thanking our operating employees who delivered a record first quarter across the North American network. The quarterly results demonstrate a tremendous job providing strong service, delivering efficiency and managing costs through the winter. As we reflect on three years as a combined company, our team has done a tremendous job of safely executing our vision and delivering resilient, industry-leading service for our customers. Now turning to the quarter, I'm very pleased with our network performance, which reflects a clear pattern of continuous improvement since the merger. Since the first quarter of 2024, our train weight and length have increased by 9% and 7%, respectively. Our locomotive productivity has improved by 8% and our fuel efficiency has improved by 2%. Our velocity across the system improved by 4%. These results highlight our progress as ongoing productivity and velocity gains continue to drive improved cycle times, better asset utilization and dependable customer service for 2024, 2025 and into 2026. While these results are encouraging, we still see opportunity ahead and are executing several focused velocity initiatives across the key North-South network to drive further improvement in velocity, fluidity and capacity. Now turning to labor, I'm very pleased to share that CPKC reached a tentative long-term agreement with the SMART-TD and BLET unions. This is an eight-year agreement covering approximately 1,700 train service employees across 11 U.S. states. Once ratified, our hourly agreements will be largely optimized across our U.S. network. This represents a key labor milestone and positions us for additional operating improvements. Importantly, these agreements bring meaningful improvements in pay and quality of life for our railroaders by delivering the stability and flexibility we need to operate efficiently and reliably over the next decade. Now turning to safety, our focus remains on sustaining strong fundamentals and disciplined execution across the network. Our FRA personal injury rate was 0.91 and our train accident frequency was 0.93. We continue to make progress in personal injury performance. While train accident frequency increased year-over-year, it follows an all-time record low in the first quarter of 2025. We remain committed to our Home Safe program and to driving continuous improvement across our network. Now turning to resources and capital, we remain well aligned with our growth outlook and expect continued strong productivity improvements in 2026. From a capital perspective, we have received 36 of the 100 Tier 4 locomotives, in addition to the 100 million that we delivered in 2025. These locomotives are delivering meaningful improvement in efficiency and reliability, particularly across the Canadian network. We are continuing to drive and deliver on our merger-related capital improvements. These upgrades, combined with our focus and velocity initiatives, are improving speed and throughput on the critical North-South network. I'm also pleased to share that we have completed capital improvements on our portion of the SMX East-West corridor with CSX, connecting shippers to Mexico, Texas and the U.S., where speeds are now up to 49 miles an hour on this network. In closing, the network is operating from a position of strength with record performance supported by sustained improvements in efficiency, velocity and service. Our investments in capacity, power and safety, paired with labor stability, have left us with a well-balanced and resourced network that reinforces our ability to deliver reliable service and volume growth. As we look through 2026, we remain focused on disciplined execution and on delivering long-term value for our customers and our shareholders. With that, I'll pass it over to John.

All right. Thank you, Mark, and good afternoon, everyone. I'm pleased with our first quarter performance and the way this network and team continues to deliver and execute for our customers. Despite a very high bar, this franchise again produced a record Q1 RTM growth, now 6 of the past 7 years, with the only exception being the strike year in 2022. This quarter, we again delivered solid volume growth across the franchise, supported by strong grain shipments, continued pricing discipline and contributions from synergies and self-help initiatives. While mix and macro factors impacted cents per RTM in the quarter, our underlying performance remains strong, and I'm encouraged by the momentum to start the second quarter. Now looking at our Q1 results. This quarter, freight revenue was down 3% on a 2% RTM growth. Cents per RTM was down 4%. We continue to deliver strong pricing with renewals exceeding the top end of our long-term 3% to 4% outlook. Yields in the quarter were impacted by FX, the removal of the federal carbon tax in Canada and negative mix. Now in April, cents per RTM has inflected positive supported by our pricing, lapping the carbon tax removal, macro tailwind from higher fuel prices and moderating mix headwinds. Now taking a closer look at our first quarter revenue performance, I'll speak to FX-adjusted results. Starting with our bulk business. Q1 was a record quarter for grain across revenue, RTMs and carloads with revenue up 14% and 12% volume growth. Canadian grain volumes were up 13%, supported by record harvest that's up 20% year-over-year. Our U.S. grain volumes rose 12%, driven by a record corn crop and higher volumes to Mexico and the Pacific Northwest. This performance highlights the strength and diversity of our franchise as customers leveraged our unique North American network to access new destination outlets, driving a 50% increase in trains from Canada and the U.S. into Mexico. Now looking ahead, we expect grain to continue to deliver outsized growth deep into the current crop year. In potash, revenues were down 2% on 2% volume growth driven by continued strong demand for export shipments. With solid demand fundamentals and Canpotex fully committed through the first half of the year, we continue to expect potash to be a solid contributor to our base business in 2026. To round out bulk, coal revenue was down 11% on a 10% reduction in volumes. This reduction was driven by a number of unexpected production-related issues at customer mines that impacted shipments through the quarter. As a result, coal alone reduced Q1 RTMs by over 1%. While we expect volumes to stabilize in the second half of the year, we expect coal to continue to be a headwind in Q2 and on the full year. Moving on to our merchandise business. Energy, chemicals and plastics revenue and volume declined 5% in the quarter. This decline was driven by lower refined fuel volumes to Mexico reduced Pemex heavy fuel oil shipments and the impact of a plastics plant closure late last year. Looking ahead, we are seeing our ECP volumes continue to stabilize, supported by increases in crude market share wins and self-help initiatives. Our forest products revenue declined 14% on a 10% decline in volumes. Volumes were impacted by tariffs on Canadian lumber exports to the U.S. along with the broader macro softness in housing in the pulp and paper markets. Now similar to ECP, we are seeing this business also stabilize with a focus on offsetting headwinds through truck conversion, synergies and market share gains. Encouragingly, we delivered record volumes of building products into the Texas market during the month of March and orders have continued to improve as we move through April. Metals, minerals & consumer products revenues were down 1% on 3% volume growth. Growth in this space was supported by strong industrial development pipeline and synergies, including new long-haul business in sand, stone and other aggregates supporting construction activity across our network. This strength was partially offset by ongoing impact of tariffs on our cross-border steel business. Overall, we remain very encouraged by industrial development momentum on our network and expect to continue mitigating tariff headwinds through targeted sales campaigns across our network. Moving on to the automotive sector. Revenue was down 6% on 2% volume growth. Our auto franchise delivered another quarter of volume growth from new business wins, including land bridge shipments from Mexico to Canada with a 13% increase in our average length of haul in this business unit. We delivered this performance despite challenging compares from pull forward shipments ahead of tariffs last year. While uncertainty remains in this area around production levels and automotive sales, we expect another year of outperformance and growth in automotive driven by our wins in 2025 and new opportunities that will come online later this year. Now closing with our intermodal business, revenue was down 1% on 3% volume growth. I'm pleased to announce that we extended new long-term contracts with Hapag-Lloyd and Loblaw Companies cementing the foundation of our intermodal franchise and unlocking new growth initiatives with both across Canada, the U.S. and Mexico for years to come. In International Intermodal volumes were up 8% and on business into the Port of Vancouver, including continued growth with our partners at Gemini. Now looking ahead, comparisons will be more challenging in the second quarter before new product offerings come online at the port of St. John and also at Lazaro and they pick up in the second half of the year. In domestic intermodal, volumes were down 1% in the quarter, our MMX train was up 12% year-over-year in Q1, marking the ninth consecutive quarter of double-digit growth on this train. This growth was offset by a slower ramp-up of our Mexico volumes in January, combined with demarketing low-margin business in domestic intermodal on our Canadian franchise. I'm also encouraged by early traction on our SMX service and partnership with the CSX. Following infrastructure investments made across this route over the past year, I'm excited to announce that we will formally launch a faster SMX product next week. The SMX will offer customers truck-like reliability linking some of North America's largest production and consumption markets between Mexico, Texas, Georgia and Florida. Looking ahead, we are encouraged by the timing of this launch as we are seeing early signs of incremental truck to rail conversions driven by higher fuel prices, tighter regulatory enforcement and reduced trucking capacity. Now to close, we are encouraged by the timing of this launch as we are seeing early signs of incremental truck-to-rail conversions driven by higher fuel prices, tighter regulatory enforcement and reduced trucking capacity. Now to close, our results reflect strong execution, record grain volumes and continued unique contributions from synergies and self-help. With good momentum to start the second quarter, more favorable comparisons ahead in improving yields, this network is primed to deliver another solid year of growth. And with that, I'll pass it over to Nadeem.

All right. Thanks, John, and good afternoon. This quarter's results reflect strong execution and cost control across the network, which drove solid financial performance. While the quarter was impacted by fuel and FX headwinds, I'm very pleased with the underlying performance of the business. The resilience of our network and our growth opportunities remain intact. Our core performance continues to be strong, reflecting the strength of our franchise durability of our operating model and consistent execution by our team. Now turning to our first quarter on Slide 12. CPKC's reported operating ratio was 66%. Our core adjusted OR was 63%, up 50 basis points from last year. Diluted earnings per share was $0.94 and core adjusted diluted EPS was $1.04, down 2% versus last year. The year-over-year decline included approximately $0.04 of impact from foreign exchange and $0.03 of impact from changes in fuel price. We also saw an additional $0.01 impact from FX losses on cash and net working capital below the line. 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 up 2% versus prior year. During the quarter, wage inflation and higher stock-based compensation were partially offset by continued productivity gains from improved train weights and workforce optimization. We expect to generate continued strong labor productivity in 2026, with headcount up modestly on mid-single-digit volume growth. Fuel expense was $458 million, down 4% year-over-year. The decline was driven primarily by the elimination of the Canadian federal carbon tax on April 1, 2025, along with improved efficiency and benefit from our contract discount, partially offset by the impact of changes in diesel benchmark prices. Our 2% improvement in fuel efficiency drove $8 million in year-over-year savings from improved train weights and locomotive productivity. Materials expense was $127 million, up 3% year-over-year. The increase was primarily driven by volume-related expense and inflation, partially offset by efficiency gains from contract optimization and lower locomotive material costs. Equipment rents were $95 million, flat versus last year, driven by efficiency gains, offset by volume-related expenses. Depreciation and amortization expense was up 4% driven by a larger asset base. Purchased services and other expense was down 3% versus prior year. The improvement was driven by productivity and in-sourcing initiatives, partially offset by cost inflation. Now moving below the line on Slide 14. Other expense was $20 million, a $13 million increase year-over-year, driven primarily by FX losses on cash and net working capital. Net interest expense was $228 million or $223 million, excluding purchase accounting. The increase was driven primarily by interest on new debt partially offset by lower credit facility and commercial paper balances as well as debt repayments. Income tax expense was $275 million or $305 million adjusted for purchase accounting and significant items. We continue to expect the full year core adjusted effective tax rate of approximately 24.75%. Now turning to Slide 15 and cash flow. Net cash used in investing activities was down 6%, primarily driven by 7% lower capital spend. We remain well on track to deliver full year CapEx $2.65 billion, a 15% reduction year-over-year. We also maintained a balanced and opportunistic approach to shareholder returns, deploying $680 million through share repurchases in the quarter. Along with dividends, shareholder return spend increased 69% in Q1. I'm also pleased to share that yesterday we announced a 17.5% increase to our dividend, reinforcing our commitment to balance shareholder returns. In closing, with the network continuing to run well, toughest quarter from a comps perspective behind us and a strong start to the second quarter, we are well positioned to deliver another year of strong results. The business is executing at a high level, generating strong cash flow and providing meaningful capacity to return cash to shareholders. I fully expect us to return to double-digit EPS growth here in Q2 and the second half, and we'll deliver on our full year double-digit EPS guidance. With that, let me turn it back to Keith.

Thank you, gentlemen. Let me go back to the operator, and we'll open it up for questions.

We'll go first this afternoon to Fadi Chamoun with BMO Capital Markets.

Yes. Thank you. I think the year was always expected to kind of start slow from a volume growth perspective versus the mid-single-digit guide for the year. Maybe if you can, John, share with us what you are hearing from customers, what does the pipeline look like in the segment that you expect to kind of lift you to that mid-single-digit range as we go into the balance of the year? And if there's any framework to think about what Q2 volume potentially you're kind of looking for?

Yes. All right, Fadi. So yes, it was certainly an interesting Q1. It just genuinely started off slow, and then we had some pent-up demand and actually February turned out to be quite strong and March sort of as we expected, as I mentioned, we definitely weren't counting on the drag related to the coal side of the business. Now looking ahead, I'll tell you, just about everything outside of our coal business has inflected positive. I'm quite pleased despite the tariff headwinds that remain out there and some of the challenges, particularly in our ECP space that we faced in Mexico with refined fuels. Despite that, they've clawed themselves back even to sort of flat year-over-year on strong demand and growing demand in crude and also our plastics business. So look, I fully expect our bulk business, that being Canadian grain, U.S. grain and potash to continue to provide really strong numbers as we move through Q2 and into the back half of the year, Fadi. I'm definitely not counting on our coal business, and that's going to have to be a headwind that we're going to have to sort of erase or make up for. As I look at our merchandise ECP forest products business, as challenged as those areas have been. As I monitor our car orders, after week in those three segments we've seen a pretty steady increase. When I said we sent record volumes into Texas of building products in March. To be honest with you, a lot of that was Canadian stuff coming cross border. So that's a really positive sign and a sign that we haven't seen for quite some time. And I'll tell you, I think a lot of it's driven by product moving in some of these traditional lanes. It's been moving truck. And I think what we're starting to see is some of this stuff slip back over to rail, not only in a little bit of an intermodal tailwind in that front, but also a carload tailwind we're seeing in some of these areas. So I do believe that's positive. We're going to watch it. I'm not spiking the football at all. But certainly, there's some upside there. And then as I go down the list, we're going to continue to outperform in the automotive sector. The team has just done a really good job to put pucks in the net and there's some stuff that's coming on yet. There's a little bit of pent-up demand that wasn't moved in the first half of the year that we're going to see. And then finally, on the intermodal side, I couldn't be more excited about our SMX product. That thing is going to pay dividends this year. We're going to see growth in the back half of the year on that partnership with the CSX. I think we proved it with the MMX; you develop a product that can compete head-to-head with trucks, and they will come. And the fact that we're launching this in a really, I think, improving environment is only going to help our sellers to go out and try to fill that train up. So I hope that helps.

Yes, sure. Maybe one follow-up on this Loblaw, Hapag-Lloyd contract you talked. Is this a renewal? Or is there a scope change in that relationship?

Well, maybe a little bit of both. They are contract renewals that we had in place that we've extended for long term with both. I think the neat thing about them and really because of the breadth of this new network, we've been able to intertwine a whole lot of new opportunities within both of those contracts. It's frankly staggering the amount of trucks that a company like Loblaw utilized coming up from Mexico or the United States and how we can create and develop new solutions, not only dry van, but reefer solutions with them. And also, as we've talked about a lot with Hapag-Lloyd, I'm excited about the opportunity of how we are continuing to grow our St. John product. We're excited about what the future might hold with them if, in fact, that progresses and goes forward as we look to next year. And Hapag continues to win not only in the Mexico, intra-Mexico market, Fadi, but also we continue to slowly build volumes going northbound coming out of Lazaro. So they are traditional contracts that we're extending forward but they also have quite a bit of new tentacles related to what this network brings to the table.

We go next now to Chris Wetherbee with Wells Fargo.

I maybe wanted to pick up on what sort of the Nadeem ended with in terms of the guide for the rest of the year, a slower start for earnings growth sounds like 2Q, you're expecting to reaccelerate into the double-digit growth range for earnings. I guess we heard from John about some of the top line opportunities. Maybe just sort of help fill out sort of the walk from where we were in 1Q to the ability to get back to that double-digit year-over-year EPS growth in 2Q and beyond?

Sure Chris. So a couple of things. Number one, Q1 was very much according to plan. Like when we look at what John mentioned about the revenue cadence, operationally Mark and team had the railroad running very well, and we're pleased with some of the productivity initiatives. That being said, we had our toughest comp from a currency point of view. The Canadian dollar was quite weak a year ago in January, and that created quite a headwind year‑over‑year. You saw it in the cents per RTM, and that's probably a bit of a surprise as far as the overall cents per RTM. Combine that with fuel and the carbon tax surcharge that went away. So effectively those headwinds dissipate, and in fact fuel turns into a bit of a tailwind. We saw the headwind in March with spot fuel increasing our costs right away, but we don't get the fuel surcharge until delayed, and so we saw that result here in April. As we look at Q2, I feel very confident both with record volumes that we're moving today — April is going to be a record month for us across the board in CPKC history and combined the two companies. The top line performed extremely well, the railroad continues to run well. The FX headwinds, we even had some unique things below the line that impacted us just with the volatility on currency, those go away. So some of that noise disappears and the underlying business continues to perform and gives us strong confidence in strong double digits here in Q2 and a very good back half in what we see from both a volume point of view and what we can deliver with this lower cost base. So we're pretty bullish, Chris.

We'll go next now to Kevin Chiang at CIBC.

You talked about some of the headwinds related to the coal franchise. I think some of that might be related to maybe some of the adjustments Glencore is making to the Elk Valley Resources play that they acquired from Teck. Just wondering, do you see this as primarily a 2026 issue and they ramp up in '27? Or is this an adjustment that could take a little bit longer and bleed into next year potentially?

Yes, Kevin. So honestly, I think the feedback so far is we're going to probably continue to struggle somewhat through Q2. I do believe there's some optimism around some things that they want to deploy in the second half of the year that could bring some upside to those volumes. Now at the end of the day, I think the lost opportunity these first 4 months and the next couple of months will be hard to make up in terms of full year compares. But we remain optimistic that the second half of the year will be better. I know they continue to work through some of the permitting issues that have been out there for quite some time now. I don't really have any additional feedback at this time on the timing with the federal government.

We go now to Tom Wadewitz at UBS.

Keith, I wanted to ask you about this. I know you get this the last couple of calls, but I just saw news today about the Rail Coalition opposing the proposed rail merger — shipper groups, Teamsters, CPKC, BNSF. What are your thoughts on that? It seems different from what we've seen in the past. What do you think the group may do, and how should we try to understand that as part of the process with UP and NS?

Well, I think at a high level, Tom, the group is more of a collective voice, a unified and very similar voice. We've not been very bashful about this. We have very strong views against the merger and the risk that the merger entails and represents for our industry. Many others do as well. The momentum continues to build, we encourage, continue to encourage all the stakeholders to make sure that they share their views because at the end of the day, this is a 3- to 4-year decision. This is a forever decision. So to push forward with the merger that creates such scale unparalleled for this industry in a forever way, that not only creates that entity, but most likely triggers an eventual duopoly is essentially putting the nation's rail network at risk. And I just don't believe, and I believe there's probably a lot of people that feel the same way that I do that UP and NS are entitled to do that. They're not playing with house money. This is the nation's economy that depends upon a robust and fluid and efficient rail network. We've had tremendous consolidation I believe, and I believe others believe we're consolidated enough. And at the end of the day, the facts will bear if we're correct. The market concentration as much as some have been dismissive in their comments about it. It's much more than just having 39% GTMs and comparing yourself to a heavily GTM railroad that moves a lot of grain, and moves a lot of coal. When you compare that's essentially west of the Mississippi River, we're talking about 43 states. We're talking about Trans Nashville, the entire continent. So at the end of the day, that's a lot at risk and at stake. The facts will bear it out. I don't think it's as simple as the applicants are presenting. And I believe Jim and Mark are going to present their best story. I'm looking forward to reading their improved story. The last one, obviously, was grossly insufficient, in my view, and I don't think I'm the only one that shares that view. So again, I think that consolidation and that coalition that you see is just a unified voice of a common concern. Enough is enough. We've had enough consolidation and for what? Who benefits? Versus who's at risk. And in the end, those rules that the STB will govern by and I believe this body will be very independent in assessing all these facts. At the end of the day, all the facts stack up and a measurement is going to be made to meet public interest and to demonstrate enhanced competition. And then all the benefits are going to exceed the harms. And I just think it's impossible with the set of facts that are going to be presented given the scale and the market power and the operational risk that it represents. So again, more to come. Let's get the application tomorrow. We're all eagerly looking forward to receiving it and reviewing it. I'll be in Missouri when I receive it. That's a show-me state, I'm looking for something to show me to feel differently. And at this point, I don't.

We'll go next now to Jonathan Chappell of Evercore ISI.

John, as far as this ramp in RTMs, are there other opportunities in energy that have kind of presented themselves recently, given what's going on in the Middle East, whether that's crude by rail, frac sand, NGLs any line of sight on kind of real volume moves there as these hostilities kind of prolong themselves much longer than anyone anticipated?

Yes. Thanks, Jonathan. Geopolitical events sort of I instantly begin to look to the sort of 3Fs, food, fuel, fertilizer, they're usually beneficiaries when you see these types of things globally. And I do believe we're seeing shoots across all those areas. I'll tell you, though, I wouldn't say anything significant has really emerged specifically in those areas. We are definitely seeing an uptick in our plastics business. We have, I would say, very spot-related type of crude opportunities that we've seen come on, maybe some unique fertilizer opportunities here and there. Nothing I would consider honestly, super needle moving. The needle movers that are emerging are really tied to fuel price and tied to trucker regulation and reduced capacity. That's really where we're starting to see the needle move. And as I mentioned, everyone kind of instantly looks at intermodal as the big beneficiary there. And certainly, we're going to see some of that, and we're deep into those discussions on the intermodal front. But as much as I'm starting to see it across our consumer base, our merchandise customers in that. And so that becomes pretty exciting because that's a really good business. And the challenge will be for the team, how do we make it sticky? How do we not allow that truck to convert back? How do we then make them stick with rail? I think there's a great opportunity for that right now. So yes, that's what we're seeing.

We'll go next now to Walter Spracklin with RBC Capital Markets.

I'm comparing the U.S. rails here and how they did in the quarter relative to the Canadian rail coming a little light. I'm just wondering if there's any divergence you're seeing, John, you're the best one to answer this. But economic divergence, is it tariff related? Is it the truck regs that are helping U.S. and not Canada? And just related to that divergence? I know the Feds in Canada have been talking a lot about larger projects. But speaking to our engineering construction companies, they're not building it in their pipeline yet. So curious if you're hearing any rumblings about any project development that would contract that divergence a little bit here as we go into 2027 and close out the year?

No, I don't think so, Walter. Our industrial development pipeline, and I think that's kind of what you're somewhat referring to is pretty robust. You look at our MMX, that business unit is largely our steel franchise which was heavily dependent on cross-border steel that is still effectively shut off. But I don't have the exact numbers in front of me. I think RTMs are up 5% plus. We haven't seen that for quite some time. And I think we are benefiting from some of these industrial development opportunities, construction, data centers, partners like Martin Marietta in sand movements, rock movements that are all supportive of this that I think you also heard from our peers in the U.S. There's no doubt our competitor in Canada and us, we're still facing pressures relative to some of these tariffs in steel and forest products. But I'm also pretty encouraged about what our U.S. franchise is producing. So I'm going to say no. I don't think there's a big divergence there.

Walter, it was simply in both cases, if you look at the yield, you look at the cents per RTM, I think there was an underestimation of the impact of currency on cents per RTM. We had some added headwinds from FX below the line, which, again, go away and then the carbon tax goes away. So I think that's what drove a bit of a softness on the top line was really the cents per RTM. And again, that's a temporal issue that goes away. There's nothing structural. I think structurally, if you look at how the Canadians are performing from a volume point of view, from an RTM point of view, I think we're both kind of top of the pack. So no change whatsoever.

And even to add to that, Walter, like our automotive franchise, I said it saw a 13% jump in the average length of haul. And I think overall, in the quarter, we were up 3% on our length of haul. The truth be told that we just had a lot of areas, short-haul steel business to the border that is not moving. We saw kind of a slow start to our automotive franchise coming out of Canada into the U.S., again, fairly short haul, high cents per RTM. We saw a really good growth, 21% growth of our land bridge business linking Canada and Mexico. So it just kind of had a perfect storm of business mix, and then you throw on top of it, record grain movements, which is on average a little lower cents per RTM against the total book and those mix pressures that Nadeem described I think came through much heavier than even we expected.

We'll go next now to Ravi Shanker at Morgan Stanley.

Keith, would love your views on the upcoming USMCA negotiation, obviously, a big catalyst for you guys and your peer. What do you think are the potential puts and takes and kind of the boundary of outcomes there, do you think? And again how might you react to that in both directions?

Well, at the end of the day, the bottom line is, I think we have 3 nations that depend upon each other to trade. I think we're in a unique position to enable that trade, Ravi. Short term, I would say, buckle up. President Trump has been consistent in his expectations. His objective through these negotiations, a renewal or renegotiation as it might be, will likely involve bilateral negotiations between Canada and the U.S., and between Mexico and the United States and some trilateral discussions. But again, at the end of the day, it all leads to increased trade between the nations and even a rebalanced trade balance favoring the United States still involves this network. So we're in a good place. We had growth after the last round. We'll have growth after this round. This network is in a very unique position to participate in some or all of that.

Got it. As a quick follow-up, is there any variability to your guide based on the outcomes there? Or do you think it's pretty straightforward?

No, it's not dependent on that.

We'll go next now to Brian Ossenbeck at JPMorgan.

Wanted to clarify, Nadeem, if you talked about stock-based comp, I might have missed it but I wanted to see what that headwind was during the quarter and how we should think about that for 2Q? And then for John, we're hearing a lot more about truckload conversion for obvious reasons. But I don't really recall hearing that too much in the past before the merger. So maybe you can help unpack what's different this time? Is it more of the investments like that SMX and some of the other cross-border stuff you've been doing? Or is there actually more from legacy CPKC, is also able and willing — the shippers are willing to kind of convert more over to your network as well. So just some thoughts on what we're seeing here now versus prior history would be helpful.

Brian, stock-based comp was about $15 million headwind in the quarter, so a little over $0.01.

And Brian, I would say, actually, when we put our transcon intermodal product in place at CP in the day, we've actually had a lot of success as legacy CP in growing that truck conversion business across Canada. We didn't talk about it a lot but a lot of vendor conversions with customers such as Canadian Tire or even Loblaw, who we talked about earlier. So that's actually been a pretty good story and our growth in our reefer business, even across Canada also was a pretty good truck conversion story. Specific to CPKC and most recently, it's all about the MMX and the great product that Mark and his team have put in place and we've been able to execute and grow. I'll tell you, we started with zero on that train and we're probably running north and south about 70% capacity. Now we've done a heck of a job to grow that and we've just grown it frankly on the speed and efficiency of that service. And honestly, I believe if this year continues to shape up and these fuel prices continue to stay where they are, we're going to pile on quite a bit more freight onto that thing. And there might actually be some discussions about what another train could look like. I'm not bullish on it. And I think we've been very transparent about the SMX. We introduced it during our original Investor Day. I think collectively, we saw a vision to create a best-in-class product, a competitive product into the Southeast. And frankly, you just look at — I think it's close to 40% of Mexico trade is with Texas, Georgia and Florida. It's just right in the wheelhouse of this product. So it's exciting that we got a partner in CSX, who's highly motivated. We got a strong sales force in Mexico, in the southern part of our U.S. that is pounding the pavement and selling the benefits of this product. So again, I think a lot of what you're going to see under that product is all going to be truck-to-rail conversion.

And John, I would just add the competition between the railroads now with the new service and since Keith took the initiative with leadership at CSX, we've been able to get that railroad up to 49 miles an hour. So we've got a premium package on that end of the railroad that will shine here in a week.

Yes. Look, I expect to run under 40 hours between Dallas and Atlanta. This thing is going to fly.

It's 3 Days, Atlanta to Monterrey.

And will be 3 days or better, Mexico to Atlanta. And with our secure border, with our bridge capacity and that, it's going to be a really good product.

We'll go next now to Brandon Oglenski at Barclays.

John or Mark, maybe this is a good follow-up. I mean I think part of the success you had with MMX and maybe you can tell me I'm wrong but it's controlling the journey from end to end, right? So how are you going to ensure that operational integrity when it's not just your network, it's running on but you're also partnering with CSX on this, right? So maybe can you elaborate on that?

I can start, Mark. I'll just tell you this. The CSX team is all in. They've invested in that franchise just like we have to get those rail speeds up. There's not been a blink, not been a waiver, whether it's Mike Cory and Mark working on what the ultimate product looks like or myself and Maryclare and her team working on how we go to market and what customers optimally fit onto that train. So you're right, it is unique. But I also think here is going to be a great example of where you put two Class 1s together, partner, get like-minded and go attack some very specific markets with the best-in-class product.

And frankly, we put a lot of capital on both sides. We put some sidings in. We've increased the capacity and we get fixated on Atlanta, it's beyond Atlanta for CSX. How can we continue to grow and build product beyond Atlanta on their side and help them get down to Mexico and Wylie as well. There's plenty of business to do in Wylie.

Let me put the exclamation point on that. Expectations are set from the top. This whole initiative is something that I've personally been involved in since day one in partnership with CSX. Steve is committed to this. I'm committed to this. So top to bottom, bottom to top. These two organizations are mobilized and equipped to create a unique market solution that makes that border seamless that can be replicated in the marketplace. That's what our entrepreneurial spirit looks like. That's what creating your own self-help looks like. That's what strategic partnership looks like. That's the difference. And it's undeniably unique, network and commitment.

We'll go next now to Konark Gupta with Scotia Capital.

And just going back to the yield comment earlier on in the call. Inflecting up in Q2 — is that referred to as up from last year's Q2 or it's up sequentially from Q1? So just trying to unpack that there? And also, any sense of fuel impact as we move into the next 3 quarters? I think you are going to be covering some of the costs through the fuel surcharges. So any sense on EPS or OR impact?

Well, it's up relative to last year quarter-to-date, about $0.05 cents per RTM.

Yes. So on the fuel side, I think it was a $0.03 headwind in Q1. As you cover the fuel cost with surcharges, what do you expect the EPS impact to be in Q2 and the second half?

Yes. So we'll see a small impact in Q2. The fuel price will be basically a bit higher than we saw in the full quarter in Q1. Of course, we'll have the full 3 months of elevated prices but we should be able to offset that with our fuel surcharge. So net-net, we'll have a small positive. If you think about the delay in the fuel surcharge that went from March into April and Q2. That makes sense? Basically a delay of earnings from Q1 to Q2, think about it that way.

Yes, I was just making sure the EPS impact is not going to be as noisy in the future quarters.

No, especially with currency and as you asked about cents per RTM and so forth. So effectively, a lot of the — I mean, there's obviously going to be volatility with the world we live in. But I'd say that the worst is behind us and we'll start seeing, in fact, a positive certainly from the fuel surcharge. So that's what gives us confidence in our Q2 being much stronger as we lap some of this noise with the carbon taxes, et cetera.

We'll go next now to Ken Hoexter with Bank of America.

So Nadeem, just appreciate the double-digit EPS outlook and it's accelerating. Maybe just parsing some mix contributions, I guess, the last 5 years, you've averaged about a 250 basis point improvement in the operating ratio from first quarter to second quarter. Can you give any thoughts on that level given the impact of fuel that you just talked about with Konark and kind of the volume growth that John is targeting? And then same thing, thoughts for the full year. Can you beat last year's sub-60 target on an adjusted basis? And maybe your thoughts on cost headwinds, incentive comp, or synergy targets post the merger, maybe just wrap that all up on the cost side.

Thanks, Ken. So I'd say that the same level sequentially year-over-year, the historical sequential improvement is pretty much in line. So we do see despite the fuel surcharge headwind on the OR because there's a push of revenues effectively from March into April, you'll see a bit of a benefit. So I feel comfortable with that historical sequential improvement of that 200 to 250 basis points is doable. And for the year, I have confidence that we can improve the OR year-over-year despite, again, the headwind from fuel surcharge. I think a lot of our cost takeout, cost initiatives and productivity initiatives that we have in place puts us in a position to still be able to improve the OR. I think we were 59.9% last year. I think we could improve on that for 2026.

I think another point to not overlook is, we were about to lap Day N last year. It's something we all like to forget, obviously, something we learned a lot from. But certainly, a lot of unnecessary cost and pain and velocity in assets that started the 1st of May, went through effectively the worst of it even through August. So certainly, we'll capture and recapture that with a very fluid network. Cost is going to go down, revenue is going to go up. Those will all be very beneficial and supportive to the comments that Nadeem has made.

We'll next now to Scott Group with Wolfe Research.

Keith, I'm wondering, do you think there's a potential path to a settlement where maybe you're supportive, maybe not that but maybe less opposed to a merger? And then I just had a random thought question on fuel. The truckers all do weekly lags, FedEx, UPS used to do monthly lags. Now they do weekly lags on their fuel surcharge. Ultimately, it doesn't really matter, you're eventually made whole. But why do you think the rail still have these monthly and for some of the rails, 2-month lags on fuel? Why does that make sense?

I'll be simple in my answer, Scott. I think there's zero chance of a negotiated agreement. No. No full stop, no merger needed. I'm not interested in negotiating.

I think it's a great idea to consider. I would remind you, we've already got the fastest reacting fuel surcharge, I believe, in the industry. I do believe there are tariff notification laws or rules with the STB that probably somewhat govern both here in Canada and also in the U.S. on how we could announce those changes and still meet those regulations. I'm all about brainstorming an idea how we can figure it out though.

We'll go next now to Stephanie Moore with Jefferies.

Great. Simple one for me here. Maybe just wanted to get a sense on how we can think about maybe some of the capital return increases, particularly the buyback boost. Is there anything you're signaling here that you want to highlight?

No, I'd say that we're generating a significant amount of free cash. Historically, CP has not sat on cash. We've been very successful buying back stock at value-creating levels. As we sit here today, we see that continue. So certainly, share buybacks are going to always be a part of our shareholder return philosophy. We also added to our dividend payout and increased our dividend by 17.5%. That's reflective of being balanced. When we speak to our shareholders and the evolution of our shareholder base, there are those that like dividends. We are at the lowest payout ratio in the industry. So we have room to grow there. But we just see ourselves as the growth opportunity is larger. There'll be time to do the dividend at a more meaningful level but we needed to start ratcheting that up a little bit but we still see buybacks as a meaningful value creation opportunity.

We'll go next now to Ari Rosa with Citigroup.

So I actually wanted to stay on the buyback comment. Keith or Nadeem, I believe you guys made the decision to pull forward the timing of the buyback last year because you felt the shares were undervalued. Here we're looking at the stock is up about 15% year-to-date. It's not necessarily a comment on, over time we continue to think stock compounds nicely. Obviously, that's a compelling case for that. But has there been a shift, I guess, in the appetite for the buyback relative to the dividend? It's a fairly sizable dividend increase. Just trying to understand how you're thinking about that. And then obviously, as the share price moves higher, does it make it harder to hit that target to repurchase 5% of shares? Or are you pretty committed to that level of buyback?

So last year, we had a roughly 3.5% to 4% program, which we completed. The stock price in Canadian dollars was closer to about CAD 106 and CAD 107. We saw an opportunity for value creation coming off the heels of strengthening our balance sheet and having good discussions with the rating agencies. That's why we announced our new buyback in January and made it a bit larger — part of that is reflecting the resiliency of our balance sheet and our ability to continue to service our debt and the diversity of our franchise and the growth story. I think we took advantage of an opportunity in the market to go take on some additional debt prior to some of the geopolitical noise that raised rates. So I think we timed it advantageously. We see an opportunity to continue to buy back shares. We're not going to hold off entirely. Are we going to be strategic and buy back at value-creating prices? Yes. So there will be times when we pause. Given all the volatility in the marketplace, there are opportunities sometimes to be strategic. You're never going to get it perfect, especially when you have a 45 million share authorization. But I fully expect we will complete it by the end of the year. And like we've seen today, some near-term pullback with some volatility in the market, we could take advantage of that and we will.

And ladies and gentlemen, we have reached our allotted time for Q&A today. I would like to turn the conference back to you, Mr. Creel for any closing comments.

Okay. Just a few comments. Listen, we started the second quarter with a lot of momentum. We're in a very good position to execute operationally, commercially and financially, that's exactly what we're focused on and intend to do in the second quarter to continue this very unique value-creating story at CPKC. We look forward to sharing those results soon. Be safe.

Thank you gentlemen. Again, ladies and gentlemen, this brings us to the conclusion of CPKC's first quarter earnings call. Again, thanks so much for joining us, everyone. We wish you all a great evening. Goodbye.