Q3 2024 Canadian National Railway Co Earnings Call

Good afternoon. My name is Sarah and I will be your operator today. All participants are now in a listen only mode. At this time I would like to turn the call over to Stacey Alderson C N assistant Vice President of Investor Relations, Ladies and gentlemen myself Jason.

Speaker Change: Thank you well show it to us email Suzhou Wuxi land enough about pet and coffee filling late in calendar 'twenty.

Speaker Change: Cleanest do move that cash you can but afternoon, everyone and thank you for joining us for Cn's third quarter 2024 financial and operating results conference call.

Stacey Alderson: Before we begin I'd like to draw your attention to the forward looking statements and additional legal information available at the beginning of the presentation.

Stacey Alderson: As a reminder, today's conference call contains certain projections and other forward looking statements within the meaning of U S and Canadian Securities laws.

These statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied E statements.

Stacey Alderson: They are more fully described in the forward looking statements section of the presentation.

Stacey Alderson: After the prepared remarks, we will conduct a Q&A session with our analysts as usual we would ask that you. Please limit yourself to one question.

Joining us on the call today are Tracy Robinson, our president and CEO, Derek Taylor, our Chief Field operations Officer.

Stacey Alderson: Whitehead, our Chief Network operations Officer.

Speaker Change: I mean, the long our chief commercial officer, and you're just not what our Chief Financial Officer. It is now my pleasure to turn the call over to CNS, President and Chief Executive Officer Tracy Robinson.

Tracy Robinson: Thanks to everyone for joining our call today.

Tracy Robinson: Most of you would've already seen in our press release on September 10th where we updated our 2020 for guidance and longer term outlook, we'll get some more details about the quarter in a moment, but I'd like to start by saying a few words about how we see things now that the noise of the past few quarters is mostly behind us now.

Tracy Robinson: First let me say a few words on operation we.

Tracy Robinson: We implemented our scheduled operating plan 30 months ago now, it's proving over and over again to be the right plan for our network and the velocity creates the levels of customer service that supports and its resilience and ability to recover.

The latest proof point is the way our operating performance rebounded after both the fires in northern Alberta in July and after our labor related shut down now.

Tracy Robinson: We bounced back quickly.

Tracy Robinson: When you're putting up numbers like October month to date car velocity at 223 miles per day train speed of 20 miles per hour.

Tracy Robinson: All while handling record western Canadian grain volumes, and maintaining really strong local service levels for our customers.

Tracy Robinson: When the team is delivering at those levels you know that this is a pretty well oiled machine.

Tracy Robinson: As a credit not the path to Derek and to the entire operating team.

Speaker Change: Second the macro was lighter than what we expected coming into 2024, and maybe even a bit softer than what we thought on our last call back in July we're seeing this play out in our merchandise business, especially in construction related commodity as well as in automotive, having said that we've built up a strong pipe.

Speaker Change: <unk> of opportunities with our customers that are unique to this network. We see this driving more than half of the volume growth in coming years. So we're confident that these will allow us to grow in spite of some of the macro challenges.

Tracy Robinson: And finally, because of the softer economy, we haven't seen the levels of volumes that we expected on parts of our network this year. Because of that, we're continuing to adjust our resource levels to more closely aligned resources to the demand we see coming our way, particularly in our eastern and southern regions. We stopped hiring on certain parts in the network earlier this year, and we continue to be purposeful in our decisions around labor. We're finding that balance between minimizing costs and having the right resources in place to handle the growth, which means some surge capacity in key locations.

Speaker Change: And finally because of the softer economy, we haven't seen the levels of volumes that we expected on parts of our network. This year.

Speaker Change: Because of that we're continuing to adjust our resource levels to more closely align resources to the demand, we see coming our way, particularly in our eastern and southern regions.

Speaker Change: We stopped hiring in certain parts of the network earlier this year and we continue to be purposeful in our decisions around labor.

Speaker Change: Finding that balance between minimizing costs and having the right resources in place to handle the growth, which means some surge capacity in key locations.

Tracy Robinson: And we have and will continue to take actions to drive margin improvement into the fourth quarter and beyond, and Pat will speak to this in more detail in a few minutes.

Speaker Change: We have and will continue to take actions to drive margin improvement into the fourth quarter and beyond and Pat will speak to this in more detail in a few minutes.

Tracy Robinson: And we're in the process of perming up our outlook for 2025, and we'll be able to give you more details on that in January. But as we do this work, our story remains the same. We're committed to delivering on our growth agenda, underpinned by our scheduled operating model. Our recipe of volume growth, pricing ahead of real inflation, and incremental margin improvement will enable us to deliver our three-year outlook of high single digit EPS cater.

Speaker Change: And we're in the process of firming up our outlook for 2025, and we'll be able to give you more details on that in January but as we do this work. Our story remains the same we're committed to delivering on our growth agenda underpinned by our scheduled operating model a recipe of volume growth pricing ahead of rail inflation and incremental.

Speaker Change: Margin improvement will enable us to deliver our three year outlook of high single digit EPS CAGR.

Derek Taylor: Okay, now turning to the quarter. I'm pleased that the team's just arbitration process is now well underway. This gives us labor stability on the railway. And with the work stoppage behind us, our operation is fully recovered, and Derek will give us more insight into how we manage through and lift it out of that disruption. On the demand side, the noise created by the labor situation clearly had an impact on our business in the quarter, most meaningfully in Intermobile. Following the network restart, we saw a snapback in domestic cinema with a man, and expect a more gradual return of the international business based on our experience with the Canadian West Coast port strike last year.

Speaker Change: Okay now turning to the quarter.

Speaker Change: I am pleased with the Teamsters arbitration process is now well underway. It gives us labor stability on the railway.

Speaker Change: And with the work stoppage behind us our operation is fully recovered and Derek will give us more insight into how we manage through and lifted out of that disruption.

Speaker Change: On the demand side the noise created by the labor situation clearly had an impact on our business in the quarter most meaningfully in intermodal following the network restart we saw a snapback in domestic intermodal demand and expect a more gradual return of the international business based on our experience with the Canadian West Coast Port strike last.

Speaker Change: Year.

Remi Lalonde: Vancouver and Rupert remain compelling gateways, and Remy and the team are working hard to get those volumes back as quickly as possible.

Speaker Change: Vancouver, and Rupert remain compelling gateways and Rami and the team are working hard to get those volumes back as quickly as possible.

Tracy Robinson: Now just a couple of things to mention on the cost sign. One, we were resource to handle more volume. And two, bringing the network to an early shutdown, as well as the Alberta wall fires, came with some additional expenses, which combined came through in our margin performance this quarter. Putting it all together, we delivered $1.72 of EPS for the third quarter, 2% higher than last year, with an OR of 63.1%.

Speaker Change: Now just a couple of things to mention on the cost side.

Speaker Change: One we will resource to handle more volume.

Speaker Change: And to bring in the network to an orderly shutdown.

Speaker Change: As well as the Alberta wildfires came with some additional expenses, which combined came through in our margin performance this quarter.

Speaker Change: Putting it all together, we delivered $1 72 of EPS for the third quarter, 2% higher than last year with an or of 63, 1%.

Unknown Executive: Just now, we'll give us more details in just a few minutes. Now we're looking past history and into the fourth quarter to really demonstrate what this railroad can do.

Speaker Change: Dan will give us more details in just a few minutes.

Speaker Change: Now, we're looking past Q3 and into the fourth quarter to really demonstrate what this railroad can do.

Unknown Executive: Now handed over to the team to provide more details.

Speaker Change: Now I'll hand, it over to the team to provide more detail over to you Derek.

Derek Taylor: Over to you, Derek. Thanks, Tracy.

Derek: Thanks, Tracy and good afternoon, everyone.

Derek Taylor: Good afternoon, everyone. I want to start by acknowledging our railroaders' health and field running the railroad day in and day out. They've been doing a great job, and I'm really proud of how well this railroad ran in the third quarter, especially when you consider what we had to manage through. My personal thanks goes out to the entire team. First, with the devastating forest fires in Jazz, the Alberta, and July. This is on our essence of the vision that connects the West Coast to the rest of our network, and is the busiest corridor on the entire sea insist.

Derek: I want to start by acknowledging our railroad result of field running the railroad day in and day out.

Derek: They've been doing a great job and I'm really proud of how well. This railroad ran in the third quarter, especially when you consider what we had to manage through my personal thanks goes out to the entire team.

Derek: First was the devastating forest fires Jasper Alberta in July.

Derek: This is on our essence subdivision.

Derek: The West coast, the rest of our network is the busiest corridor on the entire CMS system.

Derek Taylor: There was a two-day period when the fires were burning that we just couldn't run any trains at all. Once the worst of the fires passed, we were still severely limited in our operations as Jasper has located in a national park. We needed to coordinate all of our activities with the parks incident commander on the ground and even modified how we operated. This included not being able to stop trains within the park boundary, which meant we had to redesign our train service for a crew chain location 60 miles away.

Derek: There was a two day period when the fires are burning that we just couldn't run any trends at all.

Derek: Once the worst of buyers passed we were still severely limited and our operations as Jasper is located in the National Park.

Derek: We needed to coordinate all of our activities with the parks incidents and Andrew I'll have Ralph and even modify how we operate.

This included not being able to stop trains with the park boundary, which meant we had to redesign our train service for recruit change locations 60 miles away.

Derek Taylor: This was a big deal, and a team did an outstanding job of managing through all the exceptions. Second was a TCRC workshop in Gene August, where we undertook an orderly shut down our entire Canadian network. This wasn't a decision we took lightly, but it was necessary to ensure the safety and security of the railroad and our customer straight. In the lead-up to the stoppage, we embargoed certain traffic and started the park equipment and key locations for the eventual restart. This obviously had an impact on our locomotive productivity and fuel efficiency stacked in the corridor. Since the stoppage, we've seen those metrics trending the right direction.

Derek: This was a big deal and the team did an outstanding job managing through all the extensions.

Derek: Jeff It was a few CRC worst softens in August where we undertook an orderly shutdown of our entire Canadian network.

Derek: This wasn't a decision we took lightly but it was necessary to ensure the safety and security of the rule.

Derek: Our railroad and our customer freight.

Derek: And the lead up to the sources, we embargoed certain traffic and started the park equipment in key locations with eventual restart.

Derek: This obviously had an impact on our locomotive productivity and fuel efficiency.

Derek: Quarter.

This was stoppage we've seen those metrics trend in the right direction.

Derek Taylor: During those disruptions, we clearly couldn't operate the way we know how to. We saw the impact of that on our key operating metrics of car velocity at 208 car miles per day for the full corridor and street well at 7.1 hours. Disciplined adherence to the plan provided the resiliency we needed, and we bounced back quickly. It's impressive that both car velocity and through dwell for the corridor reflect on a year over your basis in spite of the challenges. In fact, the month of September, which was clear of vapor disruptions, had the best monthly car velocity and through dwell of the last three years, approaching 220 car miles per day and stick 20 hours, respectively.

Derek: During those disruptions, we clearly could operate the way we know how to.

Derek: We saw the impact of that on our key operating metrics of car velocity at 208 car miles per day for the full quarter.

Derek: Well a $7 one hours.

Derek: Disciplined adherence to the plan provided the resiliency, we needed and we bounce back quickly.

Derek: It's impressive that both car velocity through dwell for the quarter were flat on a year over year basis in spite of the challenges.

Derek: In fact, the month of September.

Derek: This was clear a major disruptions at the best monthly car velocity improved well over the last three years approaching 228 car miles per day and $6 eight hours respectively.

Derek Taylor: As we head into grain season this fall, and we've already seen a record September movement of grain in terms of volumes, I really like where we're at. We remain focused on delivering honor service commitments to our customers, and we continue to look for opportunities to improve train size given the mix of business that we're handling. At his core, the strength and skill of the team, combined with outstanding execution and what was an extremely dynamic operating environment, even with a solid plan, is the right formula to manage your disruptions and deliver for our customers.

Derek: As we head into grain season, this fall and we've already seen a record September movement of grain in terms of volumes I really like where we're at.

Derek: We remain focused on delivering on our service commitments to our customers.

Derek: We continue to look for opportunities to improve train size given the mix of the business that we're handling.

Derek: At its core the strength and skills of the team combined with outstanding execution in what was an extremely dynamic operating environment, even with a solid plan.

This is the right formula to manage through disruptions and deliver for our customers.

Patrick Whitehead: Now, I'll turn it over to Pat. Next there, let's start by talking about safety. We believe all incidents and injuries are preventable, and our priority is to ensure everyone goes on safely at the end of each day. In an environment that is dynamic as ours, there are hundreds of decisions our teams make every day move good safely. To support our frontline, we have implemented a comprehensive program that emphasizes changes to behavior and the proactive identification of hazards and high-risk behaviors. We have trained almost 500 frontline managers on exposure reduction techniques and human performance.

Speaker Change: Now I'll turn it over to Pat.

Pat: Thanks, Derek let's start by talking about safety, we believe all incidents and injuries are preventable and our priority is to ensure everyone goes home safely at the end of each day.

Pat: In an environment is dynamic as ours, there are hundreds of decisions our teams make every day to move goods safely.

Pat: Support our frontline we have implemented a comprehensive program that emphasizes changes to behavior and the proactive identification of hazards and high risk behaviors.

Pat: We have trained almost 500 frontline managers on exposure reduction techniques.

Pat: And human performance with a plan to train 1000 by the end of the year.

Pat: Compare this with our leading safety indicators to tailored programs and tools to prevent the most common incidence eliminating hazards where possible.

Pat: Along with our Boston railroads.

Pat: Our four season and walking stimulator, we're excited to add another industry first our slack simulator.

Pat: The stimulator cages and voice techniques for a variety of equipment, while introducing in train forces or slack.

Pat: Continue to engineer industry, leading realized experiences in a controlled environment.

Pat: Best prepare our teams in the field.

I am pleased with our safety performance in the third quarter, but we saw a 30% improvement in the accident frequency ratio and a 4% improvement in the injury frequency rate.

Pat: We're always striving for zero injuries and zero accidents.

Pat: Turning to Resourcing the network, we continue to take steps to adjust to the volume environment.

We have stopped hiring.

Pat: Our loan and surplus areas and are seeing our head count gradually come down as we experienced attrition.

Pat: We are purposefully parking locomotives and cars and can flex up quickly when the volumes SaaS back in.

Pat: In addition, our asset utilization strategy.

Pat: Availability through improved reliability has been making the most of the locomotives and cars that are online while lowering our cost to operate.

Pat: Our strategy includes software enhancements to improve maintenance schedule and executing our DC to AC modernization plan and process changes to reduce shops dwell.

Pat: Altogether, our highest horsepower locomotive availability has increased.

Pat: Translating to 30 more locomotives available per day, while lowering costs on maintenance and materials, which over time will reduce the capital required for additional locomotives as volume increases.

Pat: Additionally, we've improved our workforce planning and productivity.

Pat: Having a 5% unit cost improvement with our tie installations compared to 2023 in the face of labor and material increases.

Pat: The railroad is running well the plan is working and we're set up to maintain fluidity.

Pat: We have available capacity in the eastern and southern regions to easily onboard growth.

Pat: In the west we have sufficient capacity to efficiently handle growth and we are staying close to revenue and his team make sure that we have a clear line of sight to the medium and longer term volume outlook for.

For instance, this year, we are continuing to invest in double track on the <unk>.

Pat: <unk> southwest of Edmonton, which will enable us to maintain velocity and fluidity fluidity as we bring on growth and energy bulk and intermodal markets.

Speaker Change: With that I'll pass it over to Remy can give more color on the commercial side alright. Thank you Pat.

Pat: Okay.

Pat: So thats very good.

Speaker Change: <unk> grew revenue by 3% in the quarter against last year and volume by 2% in RTL terms led by long haul international intermodal and refined petroleum products, including CN specific initiatives and stronger Canadian grain exports.

Patrick Whitehead: Sports. Business has been a bit more challenging than expected due to the labor uncertainty and lower than expected industrial production in manufacturing activity and mixed signals around consumer confidence. Revenue for our TM improved by 1%, reflecting higher freight rates, but also longer average length of haul. For an exchange in fuel surcharge, impacts were small and offsetting. Carload volume slipped by 2%, mostly due to lower domestic intermodal, automotive, and short haul iron ore shipments. Let's take a look, sector by sector, on an FX adjusted basis. Overall, intermodal RTM's grew by 7% in the quarter against last year, and revenue was flat.

Speaker Change: Business has been a bit more challenging than expected due to the labor uncertainty and lower than expected industrial production and manufacturing activity and mixed signals around consumer confidence revenue for RPM improved by 1%, reflecting higher freight rates, but also longer average length of haul.

Speaker Change: Foreign exchange and fuel surcharge impacts were small and offsetting.

Carload volume slipped by 2%, mostly due to lower domestic intermodal automotive and short haul iron ore shipments.

Speaker Change: Let's take a look sector by sector on an FX adjusted basis.

Speaker Change: Overall intermodal rpms grew by 7% in the quarter against last year and revenue was flat. This reflects an 18% increase in international Rpms offset by a 14% decrease in domestic.

Patrick Whitehead: This reflects an 18% increase in international RTM's, offset by a 14% decrease in domestic. Volumes started to soften in the second quarter and through the third due to the labor situation, as shippers activated contingency plans, including pork diversions and modal shifts. Q3 international volumes still shows a year over year improvement as we move more traffic through western gateways and gain key customer winds by selling end to hand supply chain efficiency. But the domestic volume in the quarter reflects the full impact of combined pressure from labor uncertainty, market softness, and an oversupply of truck capacity. The shift in mix and the resulting increase in average length of haul pushed revenue per RTM down by 7%.

Speaker Change: Volumes started to soften in the second quarter and through the third due to the labor situation as shippers activated contingency plans, including port diversions in modal shifts.

Speaker Change: Q3 International volume is still shows a year over year improvement as we move more traffic through western gateways and gained key customer wins by selling end to end supply chain efficiency.

But the domestic volume in the quarter reflects the full impact of combined pressure from labor uncertainty market softness and an oversupply of truck capacity.

And mix and the resulting increase in average average length of haul pushed revenue per RPM down by 7%.

Patrick Whitehead: Quarterly automotive RTM's dropped by 5% and revenue by 10% year over year on account of rising dealer inventory to work pre-pandemic levels, as well as plant outages and re-tooling. Revenue per RTM slipped by 5%, reflecting a 7% increase in length of haul due to the relative shift in mix toward the important business. We thought RTM's in revenue and petroleum and chemicals grow by 10% and by 9% and 10% in the quarter respectively, do mainly to refine fuels and NGOs, including projects like the Greater Toronto Area fuel terminal and propane exports through printer per. For metals and minerals, quarterly RTMs and revenues were down by 5% and 4%, respectively.

Speaker Change: Quarterly automotive, our Tms dropped by 5% and revenue by 10% year over year on account of rising dealer inventory towards pre pandemic levels as well as plant outages and retooling.

Speaker Change: Revenue for RPM slipped by 5%, reflecting a 7% increase in length of haul due to the relative shift in mix toward the import business.

Speaker Change: We saw rpms in revenue in petroleum and chemicals grow by 10% and 10 by 9% and 10% in the quarter, respectively, due mainly to refined fuels and ngls, including projects like the greater Toronto area of fuel terminal and propane exports through Prince Rupert.

Speaker Change: Metals and minerals quarterly rpms, and revenues were down by 5% and 4% respectively.

Patrick Whitehead: After a very strong year for fraccent, volumes often blake in the quarter due to an earlier than expected seasonal slowdown in drilling activity. Our shipments of other metals in minerals reflect market conditions for steel and construction materials, modal shifts with a labor on certainty, and certain customer production interruptions. The prolonged lumber market swamp contributed to a 7% drop in forest product RTMs and a 1% decrease in revenue. In fact, lumber prices are forcing many sawmills to curtail production. Overall, coal RTMs sell by 9% and revenue by 6% on account of production and supply inconsistencies at various Canadian mines, as well as a further deterioration in US thermal coal demand.

Speaker Change: After a very strong year for Frac sand volumes softened late in the quarter due to an earlier than expected seasonal slowdown in drilling activity.

Speaker Change: Our shipments of other metals and minerals reflect market conditions for steel and construction materials modal shifts with the labor uncertainty in certain customer production interruptions.

Speaker Change: The prolonged lumber market slump contributed to a 7% drop in forest product Rpms, and a 1% decrease in revenue fact lumber lumber prices are forcing many sawmills to curtail production.

Speaker Change: Overall coal rpm's fell by 9% and revenue by 6% on account of production and supply and consistency at various Canadian mines as well as a further deterioration in U S thermal coal demand.

Patrick Whitehead: Grant and Fertilizer RTN's improved by 4% and revenue by 8% on strong demand for both Canadian and U.S.

Speaker Change: Grain and fertilizer or <unk> improved by 4% and revenue by 8% on strong demand for both Canadian and U S Green.

Patrick Whitehead: Green. That, a grant RTN's were up by 15%, but the impact was offset by lower fertilizer volume, as we laughed last year's non-recurring export potash opportunity from the Portland terminal outage. Despite a more challenging macro-economic environment than expected, CN specific growth initiatives continued to deliver. For example, we have line of fight on growing frapsan terminal capacity in support of drilling activity in Northeast DC and Alberta, with one unit training terminal set to open before the end of this year, and tracking for two more next year. Second, we're building our renewables story with the ramp of the crushed tons of capacity on both sides of the border.

Speaker Change: In fact, our grain rpms were up by 15%, but the impact was offset by lower fertilizer volume as we lapped last year's nonrecurring export potash opportunity from the Portland terminal outage.

Speaker Change: Despite a more challenging macro economic environment than expected CN specific growth initiatives continued to deliver for example, we have line of sight on growing Frac sand terminal capacity in support of drilling activity in northeast BC and Alberta with one unit train terminal set to open before.

Speaker Change: At the end of this year and tracking for two more next year.

Speaker Change: Second we're building our renewables story with the ramp up of crush plant capacity on both sides of the border.

Patrick Whitehead: And finally, the Greater Toronto Area Fuel Terminal is ramping up on expectations, receiving greater volumes of gasoline, diesel, and ethanol into a growing end market, and we're making good progress with our partners for the second phase of the project, targeting an operation toward the end of next year.

Speaker Change: Finally, the greater Toronto area fueled terminal is ramping up on expectation.

Speaker Change: <unk> greater volumes of gasoline diesel and ethanol into a growing end market and we're making good progress with our partners for the second phase of the project targeting inauguration towards the end of next year.

Patrick Whitehead: Here's what we expect to see in the fourth order by business units. Despite thoughts, consumer confidence in the U.S. and Canada, we're looking for sequential and year-over-year growth in intermodal on continued momentum around the international business. BritsRupert remains a compelling gateway for customers. As we turn the page on the labor situation, we're working very hard to regain our earlier momentum for West Coast volumes by selling our service advantage. To catch here, we'll be in the share of U.S. destination mix, which we've stepped will return gradually based on our experience following last year's port strike. Accordingly, we've seen volumes recover more quickly in the domestic segment compared to international, but I should note that there is still an overhang of lingering labor uncertainty at some Canadian ports.

Here's what we expect to see in the fourth quarter by business unit.

Speaker Change: Despite soft consumer confidence in the U S and Canada, we're looking for sequential and year over year growth in intermodal on continued momentum around the international business, Prince Rupert remains a compelling gateway for customers as.

Speaker Change: As we turn the page on the labor situation, we're working very hard to regain regain our earlier momentum for west coast volumes by selling our service advantage success here will be in the share of U S destination mix, which we expect will return gradually based on our experience following <unk>.

Speaker Change: Last year's Port strike.

Speaker Change: Accordingly, we've seen volumes recover more quickly in the domestic segment compared to international but I.

Speaker Change: I should note that there is still an overhang of lingering labor uncertainty at some Canadian ports.

Patrick Whitehead: Brought a motive, we expect to see volumes stable to slightly down against last year, in line with the CN-SERD plant schedules and OEM sales forecasts. The drooling in chemicals should continue to perform well and in line with last year, supported by the projects, despite offsetting crew shipments and an unfavorable change in NGO mix. Brought stand-in volumes will soften after an exceptionally strong four quarters due to an earlier year-end seasonal slowdown. A volume expectation for other metals and minerals, a gain-washed year, is flat to slightly down to the softer market demand. With the difficult lumber market, we don't expect significant improvement in forest products in the near-term, but we should see a seasonal uptake in overall volume against last quarter.

Speaker Change: For automotive, we expect to see volumes stable to slightly down against last year in line with the CN served plants schedules and OEM sales forecast.

Speaker Change: Petroleum and chemicals should continue to perform well and in line with last year supported by the projects, despite offsetting crude shipments and an unfavorable change in NGL mix.

Speaker Change: Frac sand volumes will soften after an exceptionally strong four quarters due to an earlier year end seasonal slowdown.

Speaker Change: Our volume expectation for other metals and minerals against last year is flat to slightly down due to softer market demand.

Speaker Change: With the difficult lumber market, we don't expect significant improvement in forest products in the near term, but we should see a seasonal uptick in overall volume against last quarter for <unk>.

Patrick Whitehead: Through whole, we expect a slight year-over-year uptake in overall volume as run rates improve sequentially, including the ramp up of the restarted Quintet method. Line, coming off record Canadian shipments in September, rain is strong, and we're looking to sustain and momentum into Q4 by running the supply chain to capacity. The US, we're looking at an oversized crop in our draw territory, which is good for volumes. The lower pod ash against last year's opportunistic gains due to the Portland terminal outage will be a bit of a drag. Overall, our expectation is that volumes will continue to grow with initiatives you need to our network on a backdrop of a weaker than expected economic landscape.

We expect a slight year over year uptick in overall volume as run rates improved sequentially, including the ramp up of the restarted quintet met coal.

Speaker Change: Coming off record Canadian shipments in September grain is strong and we're looking to sustain the momentum into Q4 by running the supply chain to capacity in the U S.

Yes, we're looking at an oversized crop in our draw territory, which is good for volumes, but lower potash against last year's opportunistic gains due to the Portland terminal outage will be a bit of a drag.

Speaker Change: Overall, our expectation is that volumes will continue to grow with initiatives unique to our network on a backdrop of a weaker than expected economic landscape.

Unknown Executive: That's right.

Unknown Executive: Nasty Booker Remi, Jim Kisser, the founder of the No Result House for Sentry Mass. Turning to slide 14, Q3 diluted EPS was up 2% versus last year. The operating ratio increased by 110 basis points to 63.1%. Auditly volumes and costs were impacted by the Alberta wildfires in July, and the worst part for genogies. From a natural economic perspective, lumber remains at the trial, and consumer consumption continues to be tested. Overall, really, news are up 3% year-year. Let me provide you with more details on the quarter. In terms of expense, which I will speak to on an exchange-adjusted basis, labor was 2% higher versus last year on 2% higher average head count.

Speaker Change: That's typical to me just visit.

Speaker Change: Isn't that just wasn't a mess.

Speaker Change: Turning to slide 14, Q3 diluted EPS was up 2% versus last year.

Speaker Change: The operating ratio increased by 110 basis points to 63, 1%.

Speaker Change: Obviously volumes and costs were impacted by the Alberta wildfires in July and the work stoppage in August.

From a macroeconomic perspective lumber remains at the trough and consumer consumption continues to be tested.

Speaker Change: Overall revenues were up 3% year over year.

Let me provide you with more details on the quarter.

Speaker Change: In terms of expenses, which I will speak to on an exchange adjusted basis labor was 2% higher versus last year or 2% higher average head count.

Unknown Executive: General Waging crisis partly asked that by lower incentive compensation. We also saw higher short-term on-productive costs in the quarter related to deadheading, regroups, and held away costs, mostly due to the work stoppage in August. Fuel dispensing increased 5% versus the same period last year. Due to 2% increase in gross ton months, 3% on-savorable fuel efficiency. In the true up-to-interferior fuel estimates, in the quarter, partly offset by a 6% decrease in price per gallon. Versus thermos is a material increase by 5% versus last year, mostly due to higher material and repair costs. We generated around $2.1 billion of free cash load year-to-date at the end of September, about $200 million lower than last year, mainly due to higher capital expenditures, partly offset by higher net cash from operating entities.

Speaker Change: General wage increases, partially offset by lower incentive compensation.

Speaker Change: We also saw higher short term unproductive costs in the quarter related to that heading re crews and held away costs, mostly due to the work stoppage in August.

Speaker Change: Fuel expense increased 5% versus the same period last year due to two.

Speaker Change: 2% increase in gross ton miles, 3% unfavorable fuel efficiency.

Speaker Change: And the true up to inter carrier fuel estimates in the quarter, partially offset by a 6% decrease in price per gallon.

Speaker Change: Purchased services and material increase by 5% versus last year, mostly due to higher material and repair costs.

Speaker Change: We generated around $2 1 billion of free cash flow year to date at the end of September about $200 million lower than last year, mainly due to higher capital expenditures, partially offset by higher net cash from operating activities.

Unknown Executive: Under a current share-referred purchase program, which runs from February 1, 2024, to January 31, 2025, we have a purchase close to 12 billion shares for almost $2.1 billion as at the end of September. We have bought our share-by-max as we continue to manage short 2.5 times adjusted debt to adjusted EBITDA leverage cards.

Under our current share repurchase program, which runs from February one 2024. So January 31, 2025, we have repurchased close to 12 million shares for almost $2 1 billion as at the end of September.

We have paused our share buybacks as we continue to manage to our two five times adjusted debt to adjusted EBITDA leverage target.

Unknown Executive: Moving to slide 15, we are affirming the guidance provided in our September 10 press release of low single-digit adjusted diluted EBITDA's growth in 2024. As we enter the final few months of the year, overall industrial production now looks to be largely flat for 2024. The good news is that we are encouraged by the progress of our CN specific growth initiatives and the Canadian wind crop that in me mentioned just mentioned. We are continuing to assume volume growth in terms of RTMs to be at the lower end of the three to 5% range, mindful that labor uncertainty persists at some of our Canadian works.

Speaker Change: Moving to slide 15, we are affirming the guidance provided in our September 10 press release up low single digit adjusted diluted EPS growth in 2024.

Speaker Change: As we enter the final few months of the year overall industrial production now looks to be largely flat for 2024.

Speaker Change: Good news is that we are encouraged by the progress of our CN specific growth initiatives and the Canadian grain crop that Amy mentioned just mentioned.

Speaker Change: We are continuing to assume volume growth in terms of rpms to be at the lower end of the 3% to 5% range.

Speaker Change: Mindful that labor uncertainty persists at some of our Canadian ports.

Unknown Executive: On our operations, I would reinforce that the network is fluid and running very well. We continue to take steps to align resources with our volume outlook and expect to see the benefit of our actions reflected in improved force quarter margins. Our forwardest change at WTI assumptions continue to be around 75 cents and 80 to 90 U adult with our respectively. Our effective task rate for 2024 is now expected to be between 24 and 25 percent. We're also affirming our 24 to 26 financial outlook of adjusted the LVPS K-GAR in the high single-digit range.

Speaker Change: On our operations I would reinforce that the network is fluid and running very well, we continue to take steps to align resources with our volume outlook and expect to see the benefit of our actions reflected an improved fourth quarter margins.

Speaker Change: Our foreign exchange and WSI assumptions continues to be around 75.

Speaker Change: And 80% to $90 per barrel respectively.

Speaker Change: Our effective tax rate for 2024 is not expected to be between 24% 25%.

We're also affirming our 'twenty four to 'twenty six financial outlook of adjusted diluted EPS CAGR in the high single digit range.

<unk>.

Tracy Robinson: In conclusion, let me reiterate a few points. The network is running well and is fully recovered from the work stoppage in the quarter. Our CN specific growth opportunities are continuing to deliver. We are delivering industry-leading service to our customers. And we remain intensely focused on delivering growth at low incremental costs.

Speaker Change: In conclusion, let me reiterate a few points.

The network is running well and has fully recovered from the work stoppage in the quarter.

Speaker Change: Our CN specific growth opportunities are continuing to deliver.

Speaker Change: We are delivering industry, leading service to our customers.

Speaker Change: And we remain intensely focused on delivering growth at low incremental costs, Let me pass it back to Tracy.

Tracy Robinson: Let me pass it back to Tracy.

Tracy Robinson: Thanks, Suzanne.

Tracy Robinson: Thanks, Suzanne operator, well now take questions.

Unknown Executive: Operator, we're allowed to now take questions. Thank you. We will now begin the question and answer session. We ask that you kindly limit yourself to one question.

Thank you we will now begin the question and answer session.

Speaker Change: We ask that you kindly limit yourself to one question.

Ken Hoexter: Your first question comes from the line of Ken Hoekster with Bank of America. Please go ahead. Well, great. Good afternoon. Just letting you kind of throw in there. We expect the operating ratio improvement kind of in fourth quarter given some of the things you move beyond. Can you talk about kind of scale? How should we think about the level of sequential improvement from third quarter to fourth quarter?

Speaker Change: Your first question comes from the line of Kenn Hoekstra with Bank of America. Please go ahead.

Kenn Hoekstra: Great good afternoon.

Kenn Hoekstra: You kind of throw in there we expect the operating ratio improvement kind of in the fourth quarter given some of the things you move beyond can you talk about kind of scale, how should we think about the level of sequential improvement.

Kenn Hoekstra: From third quarter to fourth quarter.

Tracy Robinson: Hey, Candice, Tracy. I'll take the first step of that, and I know it's just a play. A little cleanup for me on it. I, with that a doubt, our margin is going to prove in Q4. Now Q3, as you know, is normally the quarter that we have our best margins. And this year it's going to be Q4. We're pushing hard to right sides the railroads, the volume that we now expect. And I think what's really going to determine exactly where it lands is international volumes. Let me's watching that very closely and working hard to get that up again.

Tracy Robinson: Hey, Ken its Tracy I'll I'll take the first stab at that and I know Jess I'll play.

Up for me on it.

Speaker Change: Without a doubt our margin is going to improve in Q4 now Q3 as you know is normally the quarter that we have our best margins and this year, it's going to be Q4.

Tracy Robinson: We're pushing hard to right size and referenced the volume that we now expect and I think what's really going to determine exactly where it lands is international volumes rems watching that very closely and working hard to get that and get that up again and that will drive exactly where it's going to end up just anything Dan.

Tracy Robinson: And that'll drive exactly where it's going to end up choosing anything to end.

Tracy Robinson: No, I think you covered it well. I think we're not, we're not going to provide a number. But definitely we're confident that we will get a better OR in Q4. Then we did in Q3 with all the noise that you're all aware of, Ken. So stay tuned on that one. But I think we're going to deliver a better one. And our margins are going to are going to improve. Thanks for your question. Thanks.

Dan: Thank you covered it well I think we're not we're not going to provide a number but definitely we're confident that we will get a better or in Q4 than we did in Q3 with all the noise that you are all aware of Ken.

Tracy Robinson: Stay tuned on that one but.

Tracy Robinson: I think we're going to deliver a better one and our margins are going to are going to improve.

Tracy Robinson: Thanks for the final question.

Tracy Robinson: Yes.

Fadi Chamoun: Your next question comes from the line of Fatty Shemoon with BML Capital Markets. Please go ahead. Hi. Good afternoon. Thanks for taking my question. Maybe just on this volume guide. Because, you know, a low end of that three or five percent range. If I'm backing the numbers. Okay. Means that you have to grow volume almost 12 percent sequentially. And 3 percent year on year. You're down. I think somewhere around 2 and a half percent. Q4 today.

Speaker Change: Your next question comes from the line of Savi Salmon with BMO capital markets. Please go ahead.

Tracy Robinson: Okay.

Tracy Robinson: Hi.

Speaker Change: Good afternoon, Thanks for taking my question.

Speaker Change: Maybe just on that.

Speaker Change: <unk> volume guide.

Yes.

Speaker Change: Yes.

Speaker Change: The low end of that 3% to 5% range.

Speaker Change: If I'm backing the numbers okay.

Speaker Change: So do you have to grow volume, almost 12% sequentially and 3% year on year.

Speaker Change: We're down I think somewhere around two 5% quarter to date.

Fadi Chamoun: How much visibility and conviction do you have? And some of these levers that are in you. You talked about in terms of how you can ramp up through the Q4.

Speaker Change: How much visibility and conviction do you have and then.

Speaker Change: Some of these lever that you talked about.

Speaker Change: How are you going to ramp up through the quarter.

Fadi Chamoun: Yep, thanks for the question. So yes, there's a question there is an update that we're looking at year over year. It'll be a little flatter, but I tell you that the tailwinds that we have behind us are strong. Grain, we attacked, we talked about we're coming off a record September's year, and the US grain crop also looks good. Petroleum and chemicals sequentially will be strong on some of the projects. It's a bit of a headwind from mix on NGOs recovering domestic and removal. Also, it will be good, but look, we're fighting into macro environment with a bit of headwind here, and Tracy talked about recovering the US mix in our west or gateways for intermodal is going to be one of the things that we're going to be very, very focused on, and the other piece is a potash.

Speaker Change: Yeah. Thanks, Thanks for the question. So yes. So sequentially. There is an uptick that we're that we're looking at year over year, it'll be a little flatter, but I would tell you that the tailwind that we have behind us our strong grain we attacked that we talked about we are coming off a record September.

Speaker Change: Third here in the U S grain crop also looks good petroleum and chemicals sequentially will be strong on some of the projects, it's a bit of a headwind from mix on on Ngls.

Speaker Change: Recovering domestic intermodal also will be good.

Speaker Change: Look we're fighting into macro environment with a bit of headwind here.

Speaker Change: As Tracy talked about a recovery in the U S mix in our western gateways for intermodal is going to be one of the things that we're going to be very very focused on and the other piece is potash.

Fadi Chamoun: We're coming off and laughing against a very strong year last year with the opportunistic potash moves that we have, but overall, yes, we're down a little bit. Quarter today, it is pretty early, but I think we're comfortable with the low end of the range that we guided to. Thanks for your question.

Speaker Change: We're coming off and lapping against a very strong year last year with the opportunistic potash moves that we have.

Speaker Change: But overall, yes, we're down a little bit quarter to date it is pretty early.

Speaker Change: Think we're comfortable with the low end of the range that we guided to.

Thanks for your question.

Chris Weatherby: Your next question comes from the line of Chris Weatherby with Wells Fargo. Please go ahead. Yeah, hey, thanks. Good afternoon. I guess it may be warm to ask about the resource alignment, so relative to demand that you're seeing certainly sounds like demand maybe is a little bit softer than what you're hoping for earlier in the year, but I guess maybe be a little bit more specific about what are some of the levers you can pull to kind of get the cost structure a little bit better aligned.

Speaker Change: Your next question comes from the line of Chris Wetherbee with Wells Fargo. Please go ahead.

Chris Wetherbee: Yeah, Hey, thanks, good afternoon.

Chris Wetherbee: I guess, maybe I wanted to ask you about the resource alignment so relative to the demand that youre seeing certainly it sounds like demand, maybe it's a little bit softer than what you are hoping for earlier in the year, but I can see maybe be a little bit more specific about what are the some of the levers you can pull to kind of get the cost structure, a little bit better aligned and I know, it's early but as youre starting to think about 25 in the context of that longer.

Tracy Robinson: And I know it's early, but as you're starting to think about 25 in the context of that longer term category, can you just maybe give us a little bit of parameters of how you're thinking about potential earnings growth. So, Chris, I'll take the start end of that and listen, earlier this year, we were still optimistic about economic growth, and then, of course, we have to see an initiative on top of that. And up through probably early to mid May, we were running from a volume perspective, well ahead of our plan, particularly in the international as we reconstructed our portfolio there.

Chris Wetherbee: Term CAGR can you just maybe give us a little bit of parameters of how you're thinking about potential earnings growth.

Speaker Change: So Chris I'll take the start end of that and a lift in their earlier. This year, we were still optimistic about economic growth and then of course, we have the <unk> initiatives on top of that and up in through probably early to mid May we were running from a volume perspective, well ahead of our plan, particularly in international as we constructed our.

Speaker Change: Our portfolio of that when the labor uncertainty kind of hit.

Tracy Robinson: When the labor uncertainty kind of hit, you know, we, yeah, I would say it got pretty muddy for us to figure out what to be ready for when we got through there, but as we've come through that, it's pretty clear that there's a softer kind of macroeconomic environment than we had anticipated and as we look forward. We see that continuing through next year, so kind of lower and longer. And so we are, you know, we started in Q2, as I said earlier, but we are starting to make those adjustments, and we're driving pretty hard to this new view of what volume is going to look like.

Speaker Change: I would say it got pretty money for us to figure out what can be ready for when we got through there, but as we've come through that it's pretty clear that there is a softer macroeconomic environment than we had anticipated and as we look forward.

We see that continuing through next year is still kind of lower and longer and so we are we started.

Speaker Change: In Q2, as I said earlier, but we are starting to make those adjustments and we're driving pretty hard to this new view of what volume is going to look like we're doing it differently across the different regions, but Pat why don't you why don't you give a bit of an overview around the levers that we're pulling as Chris said.

Patrick Whitehead: We're doing it differently across the different regions, but Pat, why don't you want to give a bit of an overview around the levers that we're pulling this, Chris? Certainly can, so we continue to adjust all of our resource levels to match the volumes that we see. You can see the changes in our FTE counts, particularly transportation, training engine service folks. We're just seeing the transition from Q2 and Q3. We were down about 200 training engine FTEs, and now we're down well over 600 on the training engine service side. We've parked 140 locomotives; we have returned over a thousand tenor beams of relief.

Speaker Change: Certainly can so we continue to adjust all of our resource levels to match the volumes that we see now you continue to changes in our FTE counts, particularly transportation train and engine service folks. We are as you see the transition from Q2 into Q3.

Speaker Change: We're down about 200 trading engine Ftes and now were down well over 600.

Speaker Change: Train and engine service side, we've part 140 locomotives. We have returned over a 1000 center beams are released.

Patrick Whitehead: We've reduced intermodal platforms by 20% by driven primarily by off-lining cars to foreign railroads, and we continue to evaluate each and every day the resources that are needed for the volumes that we see, and we'll continue to make those changes.

Speaker Change: We've reduced intermodal platforms by 20% driven primarily by Offloading cars to foreign railroads.

Speaker Change: And we continue to evaluate it.

Speaker Change: Valuation each and every day and the resources that are needed for the volumes that we see will continue to make those changes.

Tracy Robinson: So let me just kind of close up on that. You know, the railroads running really well, really well. In fact, almost a little too well. I'd want a little bit more tension between the volumes and kind of our operating capacities. So the guys are on it, and we're driving down to the levels that we need to, to make sure that our margins are in the right place as we look forward. The secret to this and the art more of this is making sure that we take it to a level that leads up to the capability to grow with our customers as we look forward.

Speaker Change: Just to kind of close up on that.

Speaker Change: We're trying to really well really well in fact, almost a little too well I'd want a little bit more tension between the volumes and kind of our operating capacity. So the guys are on it and we're driving down to the levels that we need to to make sure that our margins are in the right places we look forward the secret to the SME. The art more of this is making sure that we take it to a level that.

Speaker Change: <unk> has the capability to grow with our customers as we look forward, we have great line of sight on the CN specific initiatives <unk> talked about some of them.

Tracy Robinson: We have great line of sight on the CN specific initiatives. Remi talked about some of them, you know, when we're punishing that pipeline.

Speaker Change: When we replenish in that pipeline and the Big question is where we put the pin on the macroeconomic and we're doing that work as we finish off the year here and well have a little bit more color for you in January when we talk to you then thanks for the question Chris.

Tracy Robinson: The big question is where we put the pin on the macroeconomic, and we're doing that work as we finish off the year here, and we'll have a little bit more color for you in January when we talk to them. Thanks for the question, Chris.

Cherilyn Radbourne: Your next question comes from the line of Sheryl and Radborne with TD Cowan. Your line is open. Thanks very much. Good afternoon.

Speaker Change: Your next question comes from the line of Cherilyn Radbourne with TD Cowen Your line is open.

Cherilyn Radbourne: Thanks, very much good afternoon.

Cherilyn Radbourne: When you think about the curve ball that 2024 has grown at CN and let's satisfy the CIRB process because that was really unusual and shouldn't recur. Can you talk about how you're factoring geopolitical issues and environmental events into your planning process today, personally, how you would have done in the past and when you think that will translate into any change in the way that you provide guidance in the future. That's a really important question. So let me tell you, yes, we do a lot more work than we ever have and do a lot more consulting on where we think in and how we think the geopolitical events will impact volumes.

Cherilyn Radbourne: When you think about the curve ball that 2024 has grown at CN and let satisfied the CRB process can fatwood really unusual and shouldn't recur can you talk about how youre factoring geopolitical issues and environmental events into your planning process. Today, Firstly tie you would have done in the.

Cherilyn Radbourne: And what do you think that will translate into any change in the way that you provide guidance in the future.

Speaker Change: That's a really important question Sheila So let me tell you, yes, we do a lot more work than we ever have.

Cherilyn Radbourne: And do a lot more consulting on where we think <unk> and.

Cherilyn Radbourne: And how we think the geopolitical events will impact volumes, whether it's between North America and the rest of the globe or within North America, and we know for sure we'll never get it right, but the ideas that we understand the range of outcomes well enough to be able to make important decisions around how we resource our plan of course important part of that process is also.

Tracy Robinson: Whether it's between North America and the rest of the globe or within North America. And we know for sure we'll never get it right, but the idea is that we understand the range of outcomes well enough to be able to make important decisions around how we resource our plan. Of course, an important part of that process is also the confrontations that we do with our customers. And that's always highly informative. They're close to their markets. They don't always get it right either. And so what it means for us, we may end up guiding differently in the future; that remains to be seen.

Cherilyn Radbourne: The consultation that we do with our customers and that's always highly informative they are close to their market. They don't always get it right either and so what it means for US we may end up guiding differently in the future that remains to be seen but what it means for us is that we set a plan and we're always looking for where we think we've got it.

Tracy Robinson: But what it means for us is that we set a plan, and we're always looking for where we think we've got it wrong, and we need to be very responsive to changes as we are. You know, we're making adjustments now. But it's, yeah, without a doubt, it's getting more and more difficult. What I like about what's happening is the responsiveness of the railroad. It seems that, you know, whether it's a change in flows or whether it's an event that climate or otherwise on the railroad, we have a really resilient operating plan. And the way this all starts is really good service to the customers.

Wrong, and we need to be very responsive to changes.

We are making adjustments now, but it is without a doubt it's getting more and more difficult what I like about what's happening in the responsiveness of the railroad. It seems that you know.

Cherilyn Radbourne: Whether it's the change in flows or whether it's day advantage timing or otherwise on the railroad.

Cherilyn Radbourne: Have a really resist resilient operating plan and the way. This all starts is really good service to the customers and that's what we're providing thanks for your question.

Tracy Robinson: And that's what we're providing. Thanks for your question.

Scott Group: Your next question comes from the line of Scott Group with Wolf Research. Please go ahead. Hey, thanks. Afternoon, guys. So I get the sequential margin improvement Q3 to Q4, wondering if you think we can get back to year-over-year margin improvement in Q4. And then just separately, any update you can give us on pricing and how you feel about price heading into 2025. Are there opportunities for pricing to accelerate or for not?

Speaker Change: Your next question comes from the line of Scott Group with Wolfe Research. Please go ahead.

Hey, Thanks afternoon, guys. So I get the sequential margin improvement Q3 to Q4 I'm wondering if you think we can get back to year over year margin improvement in Q4, and then just separately any update you can give us on pricing and how you feel about price heading into 2025 are there.

Speaker Change: Opportunities for pricing to accelerate or.

Speaker Change: We're not.

Tracy Robinson: Scott, you know, we are going to see sequential margin improvement in Q4s. You said, you know, where exactly that land as we resize kind of our resources is going to depend more on the volumes. And I would say that we've got great line of sight on most. The one that's really we're keeping an eye on is the international volume. So that could drive us a little bit up or a little bit down. And so we'll keep an eye on that.

Hey, Scott.

Speaker Change: To see sequential margin improvement in Q4 as you said.

Speaker Change: Where exactly that land as we resize kind of our resources is going to depend more on the volumes and I would say that we've got great line of sight on most the one that's really we're keeping an eye on is the international volumes, so that could drive it a little bit up here, a little bit down and so we'll keep an eye on that.

Tracy Robinson: And second question, sorry, second part of that, I don't recall what it was: pricing. So pricing this year has been fairly strong. I would say that we have put together, as we told you we would, the international portfolio that fits our network. And as Remi talked about it a little bit earlier, it's based on the full end and supply chain competitiveness. And we've done what we need to do on that important part of our portfolio. Pricing outside of that has been strong as we round the turn and go into 2025. You know, we expect pricing ahead of railway deflation that our service loans are at the level that I think we should expect that.

Speaker Change: And second question, sorry, second part of that I don't recover it wide pricing our pricing. So pricing. This year has been fairly strong I would say that we have put together as we told you we would the international portfolio that fits our network.

Speaker Change: And as Rami talked about it a little bit earlier, it's based on a full end to end supply chain.

Speaker Change: <unk>.

And we've done what we need to do on that important part of our portfolio pricing outside of that has been strong as we round the turn and go into 2025.

Speaker Change: We expect.

Chris Wetherbee: Pricing ahead of railroad deflation and our service levels are at the level that I think we should expect that Remy did you want to add anything to that Joe I think you covered it all Chris Okay. Thanks, Scott.

Remi Lalonde: Remi, did you want to add anything to that? I think you covered it all.

Unknown Executive: Okay, thanks.

Walter Spracklin: Your next question comes from the line of Walter Spracklin with RBC Capital Markets. Please go ahead. Yeah, thanks very much, operator. Good afternoon, everyone. I just wanted to ask a bit on West Coast port activity and certainly with some of the in bounds, we're seeing into LA Long Beach is starting to jam it jam it up a little bit, we're seeing dwells. Go up there. Curious if that's leading to any opportunity in particular for Prince Rupert.

Speaker Change: Your next question comes from the line of Walter <unk> with RBC capital markets. Please go ahead, yes. Thanks very much operator, good afternoon, everyone I just wanted to.

Speaker Change: Ask a bit on west coast Port.

Speaker Change: Port activity and certainly with some of the inbounds were seeing into L. A long beach, starting to jam it jammed up a little bit we're seeing dwells.

Speaker Change: Go up there curious if that's leading to any opportunity in particular for Prince Rupert are you seeing any new calls up there or are even Vancouver.

Remi Lalonde: Are you seeing any new calls up there or even Vancouver as LA Long Beach gets a little bit jammed up. Yeah, thanks for the question, Walter. You know, I talked about it in the prepared remarks, but the key challenge for us is going to be to recover the US mix through our Western Gameways. So the feedback that we get from customers is that the consistency and reliability of our service are very important and that service is valuable to them. But as we recover from a significant disruption, typically through Western Gameways, our business mix is probably 60/40 Canada to US.

La long beach fits a little bit agenda.

Speaker Change: Yes.

Speaker Change: Thanks for the question Walter.

Talked about it in the prepared remarks, but the key challenge for us is going to be to recover the U S mix through our western gateways. So the feedback that we get from customers is that the consistency and reliability of our service are very important in that service.

Speaker Change: As valuable to them.

Speaker Change: But as we recover from the significant disruption typically through western gateways, our business mix is probably 60 40 in Canada The U S.

Remi Lalonde: And as we recover from this, it's closer to 8020. So we know what the challenge is, but we've got a plan. And part of that is to talk to our customers about where we are. And, you know, give them some de-risking around the binding arbitration so that they can feel comfortable coming back to us. So what we're thinking about is that the pace of recovery or modeling to be closer to what it was on the recovery from last year's West Coast support strike. So that's going to take a little bit of time; the first two months, which we are at right now, are a little bit uncertain.

Speaker Change: And as we recover from this it's closer to 80 20, So we know what the challenges, but we've got a plan and part of that is to talk to our customers about where we are.

Speaker Change: <unk>.

Speaker Change: Give them some derisking around the binding arbitration, so that they can feel comfortable coming back to us. So what we are thinking about is that the pace of recovery, we're modeling to be closer to what it was on the recovering from last year's West Coast Port strike, So thats going to take a little bit of time in the first two months.

Speaker Change: <unk>.

Speaker Change: We are at right now or a little bit.

Speaker Change: Uncertain.

Walter Spracklin: But as volume starts to come back, then we expect it to be a little bit more quickly. But certainly the congestion that we see in the US courts, and there was a good report earlier this week on that. I think just underscores the value proposition from places like Rupert and Vancouver as the quickest highway down to Chicago, for example. So thanks for your question. Thank you, Walter.

Speaker Change: But as volume starts to come back than we expected too.

Speaker Change: To be a little bit a little bit more quickly.

Speaker Change: But certainly the congestion that we see in the U S ports and there was a good report earlier this week on that I think just underscores the value proposition from places like Rupert and Vancouver, as the quickest way down to a Chicago for example, so thanks for your question Walter.

Brandon Oglenski: Your next question comes from the line of Brandon Oglenski with Barclays. Please go ahead. Hey, good afternoon, everyone. And thanks for taking my question. I guess, given that you guys did change, you know, three year Kager outlook, the highest single digit on EPS. I was wondering if you could provide any detail on the composition of like volume and price, you know, like you did at your 2024 analyst meeting. And I think, Tracy, you just said, you know, the volume outlook in the year term a little bit lower, but how does that shape up for those CN specific opportunities in the out years?

Speaker Change: Your next question comes from the line of Brandon of Glinski with Barclays. Please go ahead.

Hey, good afternoon, everyone and thanks for taking my question I guess, given that you guys did change.

Speaker Change: Three year CAGR outlook to high single digit on EPS I was wondering if you could provide any detail on the composition of like volume and price.

Like you did at your 2024 analyst meeting.

Speaker Change: I think Tracey you just said.

Speaker Change: All your outlook in the near term a little bit lower but how does that shape up for those CN specific opportunities in the out years.

Tracy Robinson: Brandon, the CN specific opportunities are going to continue to give us a lift.

Speaker Change: Brendan the CN specific opportunities are going to continue to give us a lift but listen we look forward to laying that out for you in January are right now we're focused on finishing the quarter and then getting our plan in place for next year and we'll lay that out for you in January thanks, So much.

Tracy Robinson: But listen, we look forward to laying that out for you in January. Right now, we're focused on finishing the quarter and then getting our plan in place for next year. And we'll lay that out for you in January. Thanks so much.

Steven Hansen: Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead. Yeah, good afternoon. Thanks for the time.

Speaker Change: Your next question comes from the line of Steve Hansen with Raymond James. Please go ahead.

Steve Hansen: Yeah. Good afternoon. Thanks for the time, just hoping you could delve into a little bit more.

Steven Hansen: Would it help me if you could delve into a little bit more the early seasonal slowdown you've been seeing in Fraxand? I know you also call Fraxand. I was one of your growth opportunities on a self-help side. But is there anything specific driving that slowdown that you can see and whether or not you expect that to carry over into the near? Thanks. Yeah, no, thanks for the question. Yes, indeed. So we're coming off for very, very strong quarters for Fraxand. Year to date through Q3, we're up. I think 13 to 15% in RPM terms. So we think a lot of that is just pull forward of some of the work.

Steve Hansen: Early seasonal slowdown you've been seeing in Frac sand I know you also coal frac sand and I was one of your growth opportunities on our self help side, but is there anything specific driving that slowdown that you can see and whether or not you expect that to carryover into the new year. Thanks, Yeah. Thanks for the question.

Speaker Change: Yes, indeed, so we're coming off for very very strong quarters for Frac sand.

Steve Hansen: Year to date through Q3, we're up I think 13% to 15% in RPM terms. So we think a lot of that is just pull forward of some of the work. So as things have slowed down in Q4, we're still optimistic into next year, our customers and their partners are building new terminals.

Steven Hansen: So, as things have slowed down in Q4, we're still optimistic into next year. Our customers and their partners are building new terminals, and that's a great opportunity for CN because we can haul the sand up to the drilling sites, and then we haul the NGLs to market. So we still feel comfortable, and that's based on our discussions with customers and the capital they're putting in the ground to build a terminal capacity. Appreciate the time. Thanks. Thanks for the question.

Steve Hansen: And Thats, a great opportunity for <unk>, because we can haul.

Steve Hansen: Sand up to the drilling sites and then we haul the Ngls.

Steve Hansen: Due to market, so we still feel comfortable and thats based on our discussions with customers.

Steve Hansen: And the capital they are putting in the ground to build that terminal capacity.

Steve Hansen: I appreciate it thanks, thanks for the question.

Ravi Shanker: Your next question comes from the line of Ravi Shankar with Morgan Stanley. Please go ahead. Thanks for opening one. Tracy, I mean you said at the top of the call that I think the pipeline of new business accounts for about half of the growth next year. Do you have a sense of what a normalize to run rate for that is? I'm just trying to get a sense of what we can consider to be normal macro rebound versus new initiatives and maybe what that net number looks like versus normalize. So thanks, Ravi. I think as you think about it, we always hold ourselves to growing faster than the economy, and certainly that will be the case next year.

Speaker Change: Your next question comes from the line of Ravi Shanker with Morgan Stanley. Please go ahead.

Ravi Shanker: Thanks, and good afternoon, one Crazy I mean, you said at the top of the call that the.

Ravi Shanker: The pipeline of new business accounts for about half of the growth next year do you have a sense of what a normalized run rate for that is I'm just trying to get a sense of what we can consider to be kind of just normal macro rebound versus new initiatives.

Ravi Shanker: Maybe what that.

Ravi Shanker: Net number it looks like versus normalized.

Thanks, Randy I think you should think about it we always hold ourselves to growing faster than the economy and certainly that will be the case next year, what gives us the real lift is the CN specific initiatives and those arent.

Tracy Robinson: And what gives us the real lift is the CN specific initiatives, and those aren't; those can be choppy. So it doesn't come in equally at the new opportunities every month or every quarter. But what we do see is our customers investing in their infrastructure. We invest alongside where we need to, to make sure that we have the capacity to movement to move it. But we make sure in those cases that we've got line of sight to the volumes that you know that will give us a return on any investment that's required.

Ravi Shanker: Those can be.

Speaker Change: <unk>. Thanks, so it doesn't come in equally at the new opportunities every month or every quarter, but what we do see is our customers investing in their infrastructure, we invest alongside where we need to to make sure that we have the capacity movement and to move it but we make sure in those cases that we've got line of sight to the volumes.

Speaker Change: That will give us the return on any investment that's required so remi well in January play out more of what we see for next year, but it will be more youll get an annualized view of it but it's when as far as the new stuff that's coming on it will be different every quarter I hope that answered and strategic question.

Tracy Robinson: So Remi will, you know, in January, play out more what we see for next year, but it will be more, you know, you'll get an annualized view of it. But it's when, as far as the new stuff that's coming on, it will be different every quarter. I hope that answered your question.

Konark Gupta: Thank you.

Speaker Change: Thank you.

Konark Gupta: Your next question comes from the line of Konark Gupta with Scotia Bank. Please go ahead. Sorry, it would be good afternoon.

Speaker Change: Your next question comes from the line of <unk> Gupta with Scotiabank. Please go ahead.

Speaker Change: Thanks, operator, and good afternoon, just wanted to understand as we look into next year.

Konark Gupta: Do you want to understand, as we look into next year, the Canadian Green Highway seems like it's looking stronger from five years, but any thoughts on the extended inter-switching rules that are being contemplated in Canada? I'll start with that, and then we'll see if some of Remi and Cindy back up. I mean, I got to tell you, we stand behind our service. And if we're servicing our customers well, I mean, that's what draws them to our lines. And anything related to extended inter-switching slows down a supply chain, slows down a green pipeline. It makes capital investment much more uncertain and causes problems from that perspective.

Speaker Change: Indian grain harvest seems like it's looking stronger so on prior year, but.

Any thoughts on the extended into switching data.

Speaker Change: That are being contemplated in Canada.

Speaker Change: I'll start with that and then I'll see if some of romance any backup.

Speaker Change: I got to tell you we stand behind our service.

Speaker Change: And if we're servicing our customers well I mean, theyre going to that's what drives them to our lines and anything related to extended inter switching slowed down our supply chain slows down a green pipeline.

Speaker Change: It makes the capital investment much more uncertain.

Cause us problems from that perspective, we haven't seen any impact so far and don't expect to.

Konark Gupta: We hadn't seen any impact so far and don't expect to, and it's just based on service levels.

Speaker Change: Based on service levels.

Remi Lalonde: Remi, did you want to add anything more? Oh, maybe you'd underscore that we've done a very good job on green. You know, we've delivered strongly for our customers and earned good market shares as a result, including a record dose September. So, in terms of the crop size for next year, we'll have to see. We're kind of in the range of the three-year boundary now, so we'll have to see how all that shakes out. The end of the summer was a bit drier and warmer than I think we expected before, so let's see what it needs.

Speaker Change: Did you want to add anything more hardware, maybe I'd underscore that.

Speaker Change: We've done a very good job on green.

Speaker Change: We've delivered strong strongly for our customers and earn good market share as a result, including a record September so in terms of the crop size for for next year, and we'll have to see where kind of in the range of the three year boundary now so we'll have to see how all that shakes out at the end of the summer was a bit drier and warmer.

Speaker Change: Yeah.

Speaker Change: I think we expected before so all cylinders.

Remi Lalonde: Thank you.

Speaker Change: Thank you.

Brian Ossenbeck: Your next question comes from the line of Brian Austinback with JP Morgan.

Speaker Change: Your next question comes from the line of Brian <unk> with Jpmorgan. Please go ahead.

Brian Ossenbeck: Please go ahead. Hey, thanks.

Speaker Change: Okay.

Speaker Change: Hey, Thanks. Good afternoon. So a couple of quick follow ups just on the getting the share back through the I guess the U S destination to the West Coast is there still hearing about uncertainty with I guess the final labor Union out there to get their contract finalized does that come up in your conversations and then just from a staffing perspective, it sounds like youre, making some adjustments so.

Brian Ossenbeck: Good afternoon. A couple of quick follow-ups just on the getting the share back through the, I guess, the US destination to the west coast is there. Still hearing about uncertainty with, I guess, the final labor union out there to get their contract finalized. Does that come up in your conversations, Remi?

Remi Lalonde: And then just from a staffing perspective, it sounds like you're already making some adjustments. So when you see if you can get a little more context in terms of headcounting, maybe what average comp should be for this coming quarter. Thank you. Yeah, so on the first question, thank you for that. Yes, that is one of the things that comes up. You know, our international customers have some measure of needing to understand, you know, the Longshoreman Supervisors Union in the West Coast. There's also the Port of Montreal that has some labor uncertainty around it. So that's part of the headwinds that we're facing and trying to provide some comfort to our customers.

Speaker Change: When you see if you can give us.

With more context in terms of head count and maybe what average comp should be for this coming quarter. Thank you.

Speaker Change: Yes. So on the first question. Thank you for that yes that is one of the things that that comes up.

Our international customers.

Speaker Change: Have some measure of.

Speaker Change: Needing to understand.

The longshoreman Supervisors Union in the West Coast. There is also the port of Montreal.

Speaker Change: <unk>.

Speaker Change: That has some labor uncertainty around it so that's part of the headwinds that we're facing and trying to provide some some comfort to our customers and maybe Brian just to jump in on your second question on average cost per employee. If you look at the average comp in Q3 versus Q2.

Patrick Whitehead: And maybe Brian, just do a jump in on your second question on average comp for employee. If you look at the average comp in Q3 versus Q2, it's slower by about 6%, and that's mostly due to lower incentive compensation. And we did a little bit more capital work in Q3 than in Q2. From a seasonality standpoint, typically average comp for employee in Q4 is typically higher because we do less capital work. As we hit the winter engineering forces, we'll go in clean switches and we'll do less capital work. And therefore have less capital credits, so you can expect average comp on a sequential basis in Q4 to Q3 to probably go up.

Speaker Change: It's lower by about 6% and Thats, mostly due to lower incentive compensation and we did a little bit more capital work in Q3 than in Q2.

Speaker Change: From a seasonality standpoint, typically average comp per employee in Q4 is typically higher because we have we do less capital work as we hit the winter Engineering forces will go and clean switches and we will do less capital work and therefore have less capital credit. So you can expect average cost on a sequential basis in Q4 to Q3 to probably go up.

Patrick Whitehead: Thank you for your question.

Speaker Change: Thanks for your question.

David Vernon: Your next question comes from the line of David Vernon with Bernstein. Please go ahead. Hey, good afternoon, and thanks for listening to the call and taking the question. So she's on you mentioned before about maybe kind of pulling back on the buyback a little bit as your credit metrics get to the higher into your range. I guess I wonder, you know, if you guys are coming kind of coming out of this this earnings growth trough and the multiples depressed, you know, why wouldn't you maybe think about getting ahead of the buyback to make it a little bit more creative?

Speaker Change: Your next question comes from the line of David Vernon with Bernstein. Please go ahead.

David Vernon: Hey, good afternoon, and thanks for taking the call and taking the questions. Suzanne you mentioned before about maybe kind of pulling back on the buyback a little bit is your credit metrics get to the higher India range I guess I Wonder. If you guys are kind of coming out of this this this earnings growth trough in the multiples depressed why wouldn't you maybe think about getting ahead of the buyback to make it a little bit.

David Vernon: Is kind of overall, right? I mean, if growth does start to accelerate, the multiple starts to expand to get a little bit less bang for the buck. I'm just wondering why it wouldn't might might not think about sort of front loading some of this return to growth.

David Vernon: More accretive kind of overall right I mean, if growth does start to accelerate the multiples start to expand to get a little bit less bang for the Buck I'm, just wondering why it wouldnt might might not think about.

Sort of front loading some of this return to growth.

Tracy Robinson: Yeah, David, thanks for the question. Listen, this is a conundrum that we have and we debated on the quasi regular basis to your point. When you believe that the stock prices down, why don't you do more? Versus, you know, managing to our leverage target of 2.5 so far to your point and 2.3, we've decided to manage to that target of 2.5 times that, you know, average debt with the dot. We continued to have those questions. I mean, we'll continue at the debate. Stay tuned. We'll see what we do. But so far we've managed to that target, and this is discussions that we have.

Speaker Change: Yes, David Thanks for the question listen this is a conundrum that we have and we debated on the quasi regular basis to your point when when you believe that the stock price is down why don't you do more.

David Vernon: Versus managing to our leverage target two five so far to your point in Q3, we have decided to manage to that to that target of two five.

David Vernon: <unk> five times.

Average.

David Vernon: Debt to EBITDA, we continue to have those questions. I mean, we will continue at the debate stay tuned we'll see what we do but so far we've managed to that target in this discussions that we have I mean, we actually had the discussion with our board yesterday.

Tracy Robinson: I mean, we actually had the discussion with our board yesterday. So stay tuned on that, but that's what we're looking at. Thanks for your question, David.

So stay tuned on that but that's that's what we're looking at.

Speaker Change: Thanks for your question David.

Benoit Poirier: Your next question comes from the line of Benoit Plaudier with Desjardins. Please go ahead. Yeah, thank you very much, and good afternoon, everyone.

Speaker Change: Your next question comes from the line of Ben <unk> with Deutsche Bank. Please go ahead.

Speaker Change: Yes, thank you very much and good afternoon, everyone.

Benoit Poirier: Could you maybe provide an update on what you see from Mexico these days in light of comments made by the new president and also the upcoming US election. And especially related to your Falcon Premium service. And if you could say a few words on your trucking operation with transects and the HNR in light of the challenging fundamentals, that would be great. Thank you.

Speaker Change: Could you maybe provide an update on what you see from Mexico. These days in light of comments made by <unk>.

Speaker Change: Brexit and also the upcoming U S election, especially related to your Falcon premium service and if you could say a few words on your trucking operation with <unk> and.

Speaker Change: <unk>.

The challenging fundamentals that would be great. Thank you.

Speaker Change: We have been a lot of that Theres a lot in that one let me just start by saying that we're watching all of the.

Derek Taylor: There's a lot in that one. Let me just start by saying that we're watching all of the political scenarios across all borders very closely, but we're managing our business to what we see in front of us. I'm going to turn to Derek to talk a little bit about our Mexico business that we do in conjunction in that case with the U.P. Generally, we're optimistic, but he'll speak to it.

Speaker Change: Political scenarios across all borders very closely.

Speaker Change: But we're managing our business to what we see in front of us I'm going to turn to Derek to talk a little bit about Ted our Mexico business that we do in conjunction in that case with E&P generally we're optimistic the he'll speak to and then when it comes to transact in the other trucking operations.

Derek Taylor: And when it comes to transects and the other trucking operations, I'll have Remi make a couple of comments. Thanks, Tracy. And good afternoon, Benoit. Listen, the Falcon service, the rain solid. I mean, we continue to achieve a consistent, reliable five-day transit time to Eastern Canada. Well, we wish it would grow a bit faster. I mean, it does take time when we said before for these customers to gain that trust. A lot of this product removing is very time sensitive, but we've been very consistent. And, you know, we're playing a long game.

Speaker Change: I'll have remi I'll make a couple of comments and Derek Thanks, Tracy and good afternoon, and well listen the bulk and service remained solid and we continue to achieve the consistent reliable five day transit time to eastern Canada, while we wish it would grow a bit faster I mean, it does take time and we said before for these customers to gain that trust allows us product remove it as very time sensitive.

Speaker Change: But we've been very consistent and we're playing a long game, we will look at us and our partners at the <unk> and the FX needs I'd like to thank them because we have a three railroad service that acts as a single line service in terms of transit time and the value of the products. So we're confident words that in.

Remi Lalonde: Look at this. You know, our partners at the U.P. and the effects. I'd like to thank them because we have a three railroad service that acts as a single line service in terms of transit time and the value of the product. So we're confident words that and we'll keep after it.

Speaker Change: We'll keep after Remy, yes, thanks, Derrick and I guess, what I'd say Ben web overall.

Remi Lalonde: Really? Yeah, thanks, Eric. And I guess what I'd say, Benoit, who on the transects, I mean, if you look in our case, it's in the domestic intermodal business. And one of the challenges we have for domestic business is really around an oversupply truck capacity, which we're still feeling there. And also that is closely correlated with consumer confidence. And so it is, it is a challenging market in the domestic intermodal, but we expect it sequentially to do better versus the third quarter as they're able to recover more quickly given the turnaround in.

Speaker Change: On the transaction I mean, if you look in our case its in the domestic intermodal business and one of the challenges we have for domestic business is really around an oversupply of truck capacity, which we're steel we're still feeling there and also that is closely correlated with consumer confidence and so it is it is.

Speaker Change: The challenging market in the domestic intermodal, but we expect it sequentially to do better versus versus the third quarter as they are able to recover more quickly given the turnaround in assets.

Speaker Change: Good morning.

Benoit Poirier: Thank you very much.

Speaker Change: Thank you very much.

Jonathan Chappell: Your next question comes from the line of John Chappell with Evercore ISI. Please go ahead. Thank you. Good afternoon.

Speaker Change: Your next question comes from comes from the line of Jon Chappell with Evercore ISI. Please go ahead.

Thank you and good afternoon.

Jonathan Chappell: Derek and maybe Pat, as well, to try to understand how you're managing these resources and the software demand backdrop, while you're also still trying to recover volume to the West Coast ports, and there's all this uncertainty with labor, etc. How are you thinking about kind of the cost side of it in a short term versus maintaining service reliability, so if you do get that recovery in the West Coast, the service doesn't choke on a volume surge. Okay, I'll take that one. I would say this: that while we are aggressively adjusting the resources to match the volume, we feel very good about where we are with this.

Speaker Change: Derek maybe Pat as well just trying to understand how you are managing these resources in a softer demand backdrop. While you also still trying to recover volume to the west coast ports and there is always uncertainty with labor et cetera. How are you thinking about kind of the cost side of it in the short term versus maintaining service reliability. So if you do get that recovery in the west.

As the service doesn't choke on a volume surge.

Speaker Change: Okay I'll take that one I would say this that while we are aggressively adjusting the.

Speaker Change: Resources to match the volume.

Speaker Change: We feel very good about where we are with this we've created a locomotive surge fleet with what we have parked.

Patrick Whitehead: We've created a locomotive surge fleet with what we have parked. The mechanical improvements that I talked about, both in shop processes, reducing dwell, some of the IT improvements we've made within the process as well, are producing more locomotives, gives us more confidence in the locomotives that we have stored. So I feel very good about where we are with locomotives' availability. Should we have a surge? We feel good about where we are from a car perspective, and frankly, some of the self-help that we have done with simplifying the crewing structure has produced a surplus and led us to some of the reductions that we've made in overall training and engine headcount.

Speaker Change: The mechanical improvements that I talked about both in.

Speaker Change: Shop processes, reducing dwell some of the.

Speaker Change: Improvements, we've made with our process as well are producing more locomotives gives us more.

Speaker Change: Confidence in the locomotives that we have stores. So I feel very good about where we are with locomotive availability should we have a surge I would feel good about where we are from a car perspective, and frankly some of the self help that we have done with simplifying the crewing structure as produced a surplus and.

And led us to some of the reductions that we've made in overall train and engine head count. So we feel good about where we are from a resource perspective, and the railroad is running very well and that has also created capacity Derek anything to add.

Derek Taylor: So we feel good about where we are from a resource perspective, and the railroad is running very well, and that has also created capacity. There anything to add. Yeah, no thanks, Pat. Pat and I are attached at the hip when we look at these resources and listen. I mean, when you look at it with the macroeconomic backdrop and other things, we have been very patient and we've taken a very mature approach. When you look at this resource realigned that we've recently done over the past time period, really starting back with let an attrition workforce starting in Q2 in certain places.

Speaker Change: That patent are attached at the hip when we look at these resources and listen I mean, when you look at it with the macroeconomic backdrop and other things we have been very patient and we've taken a very mature approach. When you look at this resource realignment. We've recently done over the past time period really starting back with what an attrition workforce starting in Q2 in certain places.

Derek Taylor: So, on a go forward basis, not all locations are treated equal, but we took more of a scaffold approach to where we needed to adjust those resources that together.

Speaker Change: So on a go forward basis, not all of our locations are created equal, but we took more of a scalpel approach to where we needed to adjust those resources that together. Thanks for your question. Let me just stay on top of that one final thing is our service quality will always be primary alright, and so part of our as part of our approach and our scheduled operating plan and we think.

Derek Taylor: Thanks for your question. Let me just say, on top of that, one final thing is our service quality will always be primary. And so part of our approach on the scheduled operating plan, and we think we've demonstrated that we deliver a really high level of service. And what we're doing now is just resourcing the railroad to continue to do that at a slightly just as volume level, says you know, and Derek said it's some it's precision stuff around where we're making those adjustments. Thanks so much, John.

Speaker Change: We've demonstrated.

Speaker Change: We deliver a really high level of service and what we're doing now is just resourcing. The railroad to continue to do that at slightly adjusted volume levels.

Speaker Change: And as Derek said it is.

Speaker Change: Its precision stuff around where we're making those adjustments. Thanks, so much John.

Stephanie Moore: Your next question comes from the line of Stephanie Moore with Jefferies. Please go ahead. Hi, good afternoon. Thank you. I wanted to follow up on you know kind of your updated view on the underlying volume environment given your updated kind of the single digit outlook. I'm sorry given your updated mid-term EPS outlook. I think the source or before you had said you were kind of viewing that. CM specific initiatives that drive about half of the volume performance and then kind of the other half would be kind of macro driven. So as you look forward and what's embedded in the now high single digit EPS growth.

Speaker Change: Your next question comes from the line of Stephanie Mora with Jefferies. Please go ahead.

Speaker Change: Yes.

Speaker Change: Hi, good afternoon. Thank you.

Stephanie Mora: I wanted to follow up on kind of your.

Stephanie Mora: Dated view on the underlying volume environment and Kevin your updated kind of mid single digit outlook.

Speaker Change: Sorry, given your updated midyear.

Stephanie Mora: Mid term EPS outlook I think historically before you had said you are kind of viewing that.

Stephanie Mora: CN specific initiatives to drive about half volume performance and then kind of the other half would be kind of macro driven so as you look forward and what's embedded in the now high single digit EPS growth. How would you kind of look at that balance between underlying market growth or macro and then your own.

Stephanie Moore: How would you kind of look at that balance between underlying market growth or macro and then your own specific initiatives. Thanks.

Stephanie Mora: Thanks.

Tracy Robinson: Thanks, Stephanie. I think what we've said is that, as we look forward, that is, you know, we will grow faster than the economy. Still faster than the macro. But about 50% of our volume growth is going to come from those CN specific initiatives. And that may vary over time. But as we look forward right now, that's kind of the way that we're seeing it.

Speaker Change: Thanks, Stephanie I think what we've said is that as we look forward.

Speaker Change: That is we will grow faster than the economy fell faster than the macro but about 50% of our volume growth is going to come from those CN specific initiatives and that may vary over time, but as we look forward right now thats kind of the way that we're seeing it and as we get.

Tracy Robinson: And as we get, as we confirm our numbers for 2025, and we're talking to you in January, we'll give you a little, a little more color on that then. Thanks, Fred. Thanks for the question.

Speaker Change: As we confirm our numbers for 2025, and we're talking to you in January we will give you a little a little more color on that then.

Speaker Change: Thanks, Fred Thanks for the question.

Daniel Imbrow: Your next question comes from the line of Daniel Imbrow with Steven Sink. Please go ahead. Yeah, thanks. Good evening, guys. Thanks for taking our questions.

Speaker Change: Your next question comes from the line of Daniel Enbrel with Stephens, Inc. Please go ahead.

Daniel Enbrel: Yes. Thanks, good evening guys. Thanks for taking my questions.

Tracy Robinson: Maybe to come back to the near term, kind of 4Q volume outlook here, embedding. I think we're starting the quarter a little bit softer. You mentioned automotive, and I think chemicals are soft to start the quarter. So, to reach the low end of this guide, I guess, are we assuming a change in that trend line in some of these weaker categories? Or what is embedded to drive that kind of improvement, you know, to get to at least the 4Q guide as we head into 205?

Daniel Enbrel: Maybe I'll come back to the near term kind of four key volume outlook Youre embedding I think we are starting the quarter a little bit softer you mentioned automotive and I think chemicals or thoughts to start the quarter sort of reached the low end of this guide I guess are we assuming.

And that trend line and some of the weaker categories or or what is embedded to drive that kind of improvement.

Daniel Enbrel: To get to at least the <unk> guide as we head into 'twenty.

Daniel Enbrel: Well.

Tracy Robinson: Well, for one thing, the big piece of the puzzle that we're going to work on is the International Intermodal Volumes, which I talked about a little bit earlier, which includes, you know, driving our US mix through Western Gateways. So that's going to be a big area of focus for us. You know, the other businesses' grain has been strong and will continue to be strong, both in Canada and the US. And then, you know, recovering in domestic intermodal as well. So, I mean, I think that that should all carry us into the low end of the range that we guided to earlier.

Speaker Change: For one thing the big piece of the puzzle that we're going to work on the international intermodal volumes, which I talked about a little bit earlier, which includes driving our U S mix through western gateways. So.

Speaker Change: That's going to be a big area of focus for us.

Speaker Change: The other businesses grain has been strong and will continue to be strong.

Daniel Enbrel: Both in in.

Daniel Enbrel: In Canada and the U S.

Daniel Enbrel: And then recovering in domestic intermodal.

Well, so I mean.

Daniel Enbrel: I think that that should all carry us into into the low end of the range that we guided to earlier, but as we said there is a couple of pieces of headwind. The potash is a hard comp against last year and then there is the macro environment as well.

Tracy Robinson: But, as we said, there is a couple pieces of headwind. You know, the pod ash is a hard comp against last year. And then there is the macro environment as well that we're navigating to. Thanks for the question.

Daniel Enbrel: We're navigating too.

Speaker Change: Thanks for the question.

Tom Wadewitz: Your next question comes from the line of Tom Waitowitz with UBS Financial. Please go ahead. Yeah, good afternoon. Tracy, at the beginning of the call, I think you talked about, you know, like the way the railroads are running. And I know, you know, we're calling back to kind of some of the things Ed did when he was kind of came in and set the team on a different course. He moved away from train length. And more just towards, you know, make sure you're on time and not waiting for trains. Is there an opportunity in the carload business to kind of review the schedule and maybe you look at at train lengths a little bit or do some other things if you see some of the weakness persist, right?

Speaker Change: Your next question comes from the line of Tom <unk> with UBS financial. Please go ahead.

Speaker Change: Hi, yes, good afternoon.

Speaker Change: Tracy at the beginning of the call I think you talked about like the way the railroad's running and I know <unk>.

Speaker Change: Recalling back to kind of some of the things Ed did when he was kind of came in and said the team on a different course, you moved away from train lengths.

Speaker Change: And more just towards you know make sure your beer.

Speaker Change: Time and not waiting for trains is there an opportunity in the carload business to kind of review the schedule and maybe look at train length, a little bit or do some other things. If you see some of the weakness persist right like I think some of the areas you talked about weakness seemed like carload markets and I'm. Just wondering if you can do anything on <unk>.

Tom Wadewitz: Like I think some of the areas you talked about weakness seem like carload markets. And I'm just wondering if you can, you know, do anything on schedule that helps you if some of those markets stay weak, or is that something where you just say, hey, we just want to maintain this service. And we're not really going to do things on that, you know, train length or train starts. Thank you.

Speaker Change: Schedule that helps you if some of those markets stay weak or is that something where you just say hey, we just want to maintain the service and we're not really going to do things on <unk>.

Speaker Change: Train lengths or train starts.

Patrick Whitehead: Hey, Tom. Well, for the first thing, we never moved away from train length. What we said was that the trains are going to depart on time. We're not going to hold them to wait for them to get longer before they depart. And so we want long trains to depart on time. But as, but what we're going to do is not make those decisions tactically every day, but we build that into the plant. So as we look at the operation every day, if we discover that there's opportunities to tweak the plan, to refine the plan so that we can take out a train start, combine trains, and move longer trains, then we do that, but that train departs on time.

Speaker Change #100: Hey, Tom will for the first first thing we never moved away from train length. What we said was that the trains are going to depart on time, we're not going to hold them to wait for them to get longer before they depart and so we want long trains and department in time.

Speaker Change #100: But but what we're going to do is is it not make those decisions tactically everyday, but we built that into the plant.

Speaker Change #100: As we look at the operation every day, if we discovered that there is opportunities to.

Speaker Change #100: Tweak the plan to refine the plan so that we can take out a train start combined trains and move longer trains than we do that but that train depart on time and so it's not one or the other it's what's primary interests. The scheduled operation as primary and will drive steric capacity in either one of you will know.

Patrick Whitehead: And so it's not one or the other. It's what's primary. And for us, the scheduled operation is primary. And, and we'll drive there. Kropat to need to want to be well. Yeah. No, Tom.

Patrick Whitehead: It's a great question. Listen, we have made some adjustments throughout the last two quarters. And now it's more of a scaffold approach because the manifest volume is not down so significantly to trains equal one, but there are certain days of the week we have taken a number of train starts out. So we're taking the mature approach, but we're going to run our base plan and our schedule plan. But when we need to adjust, Pat and I's teamwork together to make sure that happens. Pat and he went. I would just say that we approach the plan from a perspective that we're going to produce a plan that the outcome is the train load and train length that we desire that maximizes local load of improved productivity while providing the customer service level that we expect, which is the customer service model is.

Good question listen we have made some adjustments throughout the last two quarters now it's more of a scalpel approach because the manifest volume is not down so significantly two trains equal one but there are certain days a week, we have taken a number of train starts out. So we're taking the mature approach, where we're going to run our base plan and our schedule plan, but when we need to adjust Pat and his team work.

Speaker Change #100: Together to make sure that happens.

I would just say that we approach the plan from our perspective, we're going to produce a plan that the outcome is the trade load in train lengths that we desire that maximizes locomotive and crew productivity, while providing the customer service level that we expect which is the customer service level is.

Patrick Whitehead: is near industry best as we look at our local service adherence plan. Thank you.

Speaker Change #101: Near industry Best is we look at our local service adherence planned thanks John.

Unknown Executive: Okay, thank you.

Speaker Change #102: Okay. Thank you.

Tracy Robinson: The last question comes from the line of Ben Nolan with Steve. Please go ahead. Yeah, I appreciate it. I was going to ask a little bit about and knowing that you're going to talk a little bit more about the outlook in 2025 in January. In any early thoughts on how CapEx is expected to develop, given the focus on equipment efficiency and so forth. Yeah, Capitol is, of course, an important part of our plan for 2025 and every year. And as we put it together, it's based on a number of things, but one of those things is what the volume levels are.

Speaker Change #103: The last question comes from the line of Ben Nolan with Stifel. Please go ahead.

Okay I appreciate it.

I was going to ask a little bit about.

Speaker Change #103: Knowing that youre going to talk a little bit more about the outlook in 2025.

Speaker Change #103: In January.

Any early thoughts on how capex is expected to develop given.

Speaker Change #103: Focus on equipment efficiency and so forth.

Speaker Change #104: Yes, I think capital is of course, an important part of our plan for 2025, and every year and as we put it together.

Speaker Change #103: Just on the number of things, but one of those things is what the volume levels are so maintenance capital of course is intended to replenish the network as you consume it through day to day operations and so what volume levels are and what they are over time has an impact on how we think about maintenance capital, we'll be looking closely at that as we firm up.

Tracy Robinson: So maintenance capital, of course, is intended to replenish the network as you consume it through day-to-day operations. And so what volume levels are and what they are over time has an impact on that. And how we think about maintenance capital, we'll be looking closely at that as we firm up volume for the kind of return capital or the growth capital. You know, we only spend that, you know, when we have a line of sight and a coordinated timing with our customers and our customer initiatives as that volume comes on so that we've got line of sight to the intended returns on that capital.

Speaker Change #103: <unk> for the kind of return capital or the growth capital, we only spend that.

Speaker Change #103: When we have a line of sight and they and a coordinated timing with our customers and our customer initiatives as that volume comes on so that we've got line of sight to the intended returns on that capital. So we're working through all of that.

Tracy Robinson: So we're working through all of that. As we kind of felt, you know, put our plan together in for 2025, and you'll hear about it in January more specifically, but just know that it's a dynamic plan. Yeah. Alright. Thank you. Thanks so much.

Speaker Change #103: We can.

Speaker Change #103: Put our plan together in 2025.

Speaker Change #103: You'll hear about it in January and more specifically, but just know that it's a it's a dynamic plan.

Got it alright. Thank you. Thanks, so much.

Unknown Executive: This concludes the question-and-answer session.

Speaker Change #105: This concludes the question and answer session I would now like to turn the call back over to Tracy Robinson.

Tracy Robinson: I would now like to turn the call back over to Tracy Robinson. Thanks, Sarah. Now, let me tell you that although it's been a very eventful year so far, we're I think we're pretty well positioned through Q4, and as we advance in 2025, the road's running extremely well. We've got great momentum; those sea and specific initiatives, Remy's talking about, they're advancing nicely and they're delivering volume. And we're driving productivity and the sizing of our resources to make sure that they match customer demand so that we achieve the margins, the kind of margins that we expect, and we deliver value to our shareholders.

Tracy Robinson: Thanks, Tara now let me tell you that although it's been a very eventful year. So far we're I think we're pretty well positioned.

Q4, and as we advance in 2025, the railroad is running extremely well we've got great momentum. The CN specific initiatives Remy is talking about the advancing nicely and they are delivering volume and we're driving productivity and the sizing of our resources to make sure that they match customer demand.

Speaker Change #105: And so that we achieve the margins that kind of margins that we expect and we deliver value to our shareholders I want to thank you all for joining us today and I look forward to our next call in January Thank you.

Tracy Robinson: I want to thank you all for joining us today and look forward to our next call in January. Thank you.

Unknown Executive: The conference call has now ended. Thank you for your participation. You may now disconnect your line. ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶ ¶

Speaker Change #106: The conference call has now ended thank you for your participation you may now disconnect your lines.

Speaker Change #106: Okay.

Speaker Change #106: Okay.

Speaker Change #106: Yes.

Speaker Change #106: [music].

Speaker Change #106: Yes.

Speaker Change #106: Sure.

Speaker Change #106: Okay.

Speaker Change #106: Yes.

Speaker Change #106: Yes.

Speaker Change #106: Okay.

Speaker Change #106: Yes.

Speaker Change #106: Thank you.

Speaker Change #106: Okay.

Speaker Change #106: Yes.

Speaker Change #106: Okay.