Welcome to day 2 of our 31st Annual BofA Transportation, Airline, and Industrial Conference. Welcome to the room. I'm Ken Hoexter, BofA's Air Freight and Surface Transportation and Marine Shipping analyst. So with us this morning to kick off day 2, we've got we welcome Canadian National. The company continues to really continue its lineage on PSR and best-in-class service. We welcome Ghislain Houle, CFO, back for his 5th time in the past 7 years. Patrick Whitehead, Chief Network Operations Officer, here for his 1st time. Also, in the audience today, Stacy Alderson from Investor Relations. Definitely not Anderson, Alderson. Just want to make that crystal clear to Ghislain, who Ghislain said to direct all difficult questions to. She's here for her 2nd conference.
Ghislain and Patrick, we truly appreciate your and CN's continued commitment to our organization. I believe you guys have participated in every one of the 23 conferences that I've hosted for BofA, so thank you very much for that. So with that, let me turn it over to both of you, Ghislain and Patrick, for your thoughts on the state of the market and maybe just wrapping that up, what are the three key points you want us to take away today?
Yeah. Great. So first of all, Ken, thank you for having us. Thanks for people in the room and people on webcast listening and taking interest in a great company. You know, let me start with the conclusion. Let me start with the three takeaways. I think the first takeaway I would say is that so far this year, we're performing to plan, and I would say that we're performing even a little bit better than planned, and I'll give some examples of why I'm gonna say this. And then second takeaway would be that our network is quite fluid, our operating metrics are good, and Pat will give a little bit more detail on the second point. And then on the third point, I'll give a bit of an update on our labor situations in Canada.
And there's some of the noise that's going on right now, and I'll give investors a little bit of an update on that and where we are. So, you know, when you look at the business right now, we were quite pleased with the performance in Q1. As I said, we did as good as planned, if not a little bit better, and when you look at the volumes in Q2, they're holding together. When you look at volumes in terms of revenue ton miles, 'cause we feel that this is a better proxy for volumes, our volumes are up 9%, quarter to date, and in May, they're up 16%.
When you look at the areas of major weakness last year, if you remember, Ken, we were hitting the freight recession in the second quarter. It was intermodal international, and it was lumber. Well, intermodal international, quarter to date, is up 26%, and lumber is stabilizing, and lumber, I qualify in terms of car orders per week. Last year, if you remember, in the trough, we went as low as 1,600 car orders, and car orders meaning center beams, which is kind of these sailboats with bundles, per week, and we're stabilizing in the 2,000-ish, and in our modeling, we model 1,800-1,900, which is what we finished the year in 2023. So that's stabilizing. When I look at grain, grains is quite strong. You know, quarter to date, we're up, Canadian grain, 25%.
We're moving more grain now than we typically do at this time of the year. If you remember, in Q4, typically Q3, Q4 in Canadian grain, we're typically full out, but the farmers and some of the grain companies decided to sit on grain a little bit in those times. They didn't like the price on the world markets, so we're moving more grain. Eventually, we'll slowly run out of grain, and it's early to call what the crop is gonna look like for 2024, 2025. We're assuming in our modeling that we'll have a three-year average grain crop. And then the last piece I would say is merchandise is up 10%, mostly led by P&C, and the area of weakness I would call is on coal.
When you, when you look at coal, either West Coast or coal US is soft. Now, coal represents only 3% of our business, so it's, it's small. Coal West Coast, quarter to date, was more related to some of the issues at the mines, at the coal mines that are on our line. I think most of that, Pat, I would say, is behind us. I think that when you look at coal in May, is up 10%, West Coast. But Coal U.S., which is thermal coal, going from Southern Illinois to Convent, and that's export to Europe, that's soft, and that we feel will continue to be soft, because of demand related in Europe and also the low natural gas prices in Europe. So, you know, so far so good. You know, volumes are holding.
I would be remiss to say that, you know, due to the labor uncertainty that now exists in Canada, there are some customers that are starting to put out some contingency plans. We have visibility on bookings for containers going from Asia to either Vancouver and Rupert, and that's starting to soften. So we'll see. But like I said, so far so good. Talking about the labor, and Pat will give more detail, and you're welcome to jump in, Pat. But we are at the table in negotiation with what we call the TCRC, which is the Teamsters. So they represent over 6,000 employees in our company. They are the conductors and locomotive engineers. We are at the table.
The issues that are being discussed stems mostly from. How do you say that word again? In-
Unintended consequences.
Unintended. This is tough to say for a French person, by the way. Unintended consequences of the new work rest rules that were implemented last May, and they revolve around scheduling. They revolve around, you know, away from terminal, like with the new rest rules right now, the folks have to spend more time away from home terminal, which they don't like. It revolves around the fact that our current agreement, as you know, is a mileage-based agreement, and with the new work rest rules and the way that the clock gets reset, they end up making less money. So it revolves around this, and it revolves around crew availability for us. So we have provided an offer. It's on our website. Investors are welcome to go see it.
We believe that this offer would resolve most of these issues, but we need to discuss and review with the leadership of the union. We have an open mind. You know, we're willing to look at other solutions if there's other solutions that would resolve most, if not all, these issues for both the company and also for our workers and for our union employees. I would say last thing is, it came to our attention that the Canadian Minister of Labor has asked the Canadian Industrial Relations Board to look at whether there were the movement of certain commodities could be or should be deemed to be essential services, which would mean that, you know, we would have to move these commodities even during a labor disruption.
There cannot be any labor disruption before the CIRB renders a decision. We're hearing that they will get, they are asking for feedback and comments up until May 21st, so we know that there will not. May 21st at 5:00 P.M., so we know there will not be a labor disruption before that time, and then after this, we don't know, and we don't have visibility as to how long it's gonna take for them to render a decision. Obviously, that's causing some type of uncertainty. Uncertainty in business is never good, not good for CN, not good for our customers, not good for employees, and certainly not good for the Canadian economy, and we're hoping that this will be resolved ASAP.
Now, we are not against discussing whether rail service should or should not be an essential service, but you cannot look at this on a commodity-by-commodity basis. You will create a total operational chaos, and you will bring the system to a gridlock. You know, we are not against it, but for us, it has to be an all or nothing. Maybe on this, I'll pass it on to Pat to give a little bit more detail around this.
Okay. Thank you, Ghislain, and Ken, thank you for having us this morning. So I'll start with the uncertainty that Ghislain discussed. So we have communicated clearly with our customers that the CIRB response with no timeline in the near term, that we're business as usual. We will continue to operate, but of course, that does have the uncertainty of when does the decision come back. We have made the commitment that we will continue to update our customers, but we will continue to run the network as intended, until we see the outcome of that. I'll touch a bit on the feasibility of that request. So the request in essence is the Propane Association request is: Is propane an essential service that the railroad provides?
You think about our business. We run a network business. We run our network based on origin and destination, not by commodity. You could have a 150-car train that literally has 100 different commodities based on origin-destination pairs. It is not based on commodity, and it's just not feasible for us to run it on a commodity base. So it is, to Ghislain's point, it truly is all or nothing. We can't segment out, because I'm sure there will be other shippers that ask the same question. As Ghislain pointed out, there are the opportunity to make comment and from other commodities, and that's just not how the business operates.
As it relates to bargaining, I'll say it again, we continue to—we, we are at the table this week with the TCRC. We will be at the table next week, and we will continue to be at the table working to get a deal. We are committed to the idea and the belief that the best outcome is a mutually beneficial, negotiated agreement that, that is beneficial for our customers, our employees, and our key stakeholders, and we'll con—we will continue to bargain in that good faith. I will, I will also address some comments that are out there about CN is bargaining on safety in this round of bargaining, and, and that is just not true. And I'll cover.
So the Duty and Rest Period Rules that were mandated by the Canadian government in May 2023 provide for more rest than what the collective bargaining agreement and the previous Duty and Rest Period Rules provided for, and I'll sum that up a bit. And prior to last year in May, the workday of a railroader in Canada could be as long as 18 hours, and there were some prescribed breaks in there. But in essence, the workday, the work clock could be up to 18 hours.
What the Duty and Rest Period Rules did last year was reduce the number of hours that could be worked in a day to 12, prescribed rest, that is, federally mandated, reduced the number of days that could be worked in a week, the number of days that could be worked in a month, and required a mandatory reset break where our employees had 2 nights off every rolling 7 days to provide for proper rest. So we've been fully compliant with that mandate. We will continue to be. What we are working to do in this round of bargaining is to simplify. Prior to that, a lot of the rest that was prescribed was collectively bargained decades ago to allow for that rest in consideration of an 18-hour workday.
You know, back to what Ghislain said about unintended consequences, in 2023, we had the Duty and Rest Period Rules. We also had the paid personal leave and sick days. And you stack all of that on top of the decades-old collective bargaining agreement, unavailable time. What we are trying to do is simplify the complexity that was introduced between all of those things coming together. And, you know, safety is our first priority, and we are not bargaining on safety. What we are doing is bargaining to provide for better predictability of manpower, predictability of scheduling for our employees, and to provide the service to our customers.
18-hour workday sounds like an average research workday without the scheduled rest breaks. But the original deadline was the 22nd.
The original deadline-
Was the strike deadline , r ight? So that's when they could have given you notice, and then you would've, they would've gone on strike on the 22nd. Now they're collecting the data by the 21st, right?
That's right. Correct.
They don't have to make a ruling on the next day, that they can take their time to make the ruling. Is the three-day effect effectively now from the 21st or not necessarily until they come out with their ruling?
Pat, you can correct me if I'm wrong. My understanding, the 72 hour will be as of the date of the ruling.
That's my understanding.
That is correct.
That creates the uncertainty of now we don't even know what the bullet date is of, of a potential.
Once you get to the 21st at 5:00 P.M., unless there's more visibility as to how long that will take t hen you don't know when that decision will be rendered.
That's exactly right.
So that's the uncertainty that we're talking about. And now, at least my view, and I'm an optimist, as you know, at least we have uncertainty until the 21st. So, you know, it's business as usual, as Pat's saying.
Yeah.
As I looked at our volumes, again, yesterday, we had strong volumes. You know, and we look at this, as you know, Ken, day in, day out, so it's business as usual. Business is going well. The economy looks like it's supportive.
But you threw out there the contingency plans. Does that mean customers are starting to pull the volume, or you're saying-
Well, you know, like I said, as you remember, last year, when we had the West Coast port strike. So shipping lines decided to call to another port because they wanted, you know, the containers to go to market. And when they do that, then you have a lingering effect because they won't do that for a week or two. They'll, they'll commit for a couple of months.
And to me, that's the risk, is to have shipping lines now deciding, "Hey, I'm not gonna call in on, on Rupert and on Vancouver. I'm gonna go to Seattle Tacoma, to get that business, you know, that's, that's destined to Midwest Chicago or even to Toronto, because I'm worried that of the uncertainty, in, in, in, in Canada." So that's the risk. I'm, I'm hoping it's not gonna happen. I'm hoping that now, you know, shipping lines are gonna continue to call on those ports. Those ports are doing very well. They're very fluid.
There is a little bit of congestion in L.A. Long Beach, which helps. That's what I'm hoping for.
All right, we got a lot to cover. I don't want to stick on the strike too much, but just on average, last couple of strikes in Canada, you then go to baseball-style arbitration in Canada, where then they're picking one side or the other, right? So everybody's got to submit their party. So typically, how long do these go for? Because I just want to say, typically, it's fairly short, and then we move on, right?
It's hard to call because we can't talk on behalf of the government what the government would do. We're hearing that they would not want to push for legislation back to work. But that's hearsay, so we can't call on them. We don't know. Like Pat is saying, the good news is we're at the table, so when you're at the table, you're discussing, and we're hopeful that, you know, we'll get to a mutual agreeable solution. Like, frankly, I was on the field last week around Toronto and all of our satellite yards. I met about 40-ish train crews, and first of all, I was really favorably surprised of how people are so happy to work with CN. They're so proud, they're respectful, and when you talk to them, none of the rank and file want to strike. They all want to work.
You know, some of them that are on board, these new rest rules are creating havoc, and Pat talked about it a little bit. So these are the things we need to fix for these guys and ladies. But nobody wants to strike. Everybody's happy. Everybody wants to work. Like, I hadn't been in the field for a while, and comparing with when I was there 5, 10 years ago, the environment has changed significantly to the positive, and I'm not saying this to be nice. I mean it.
So Derek, just one other question. You said you're at the table. I just want to understand one, one quick one. Is the concept of switching from mileage-based to hourly-based, is that accepted, or is that overall concept itself still being debated?
It's still being debated.
Okay.
So in that environment, it provides a nd we've made this offer, as just Lane said. We've published it o n our website, but it simplifies some of that complexity of the multiple forms of rest coming together. Also provides for the reset break to be scheduled and an additional component of scheduling, but with it comes some concessions. And I think it is important to point out that we've been working with these new Duty and Rest Period Rules for almost a year to the date. This is the first round of bargaining since we've had these in place. So this is the first kick at the can to simplify some of this and get all of the issues on the table and negotiate.
Wonderful. Thank you for that upfront. Let's talk about kind of the business, right? So it's been a year since your May 2023 Analyst Day. Talk about your 10%-15% annual growth target with, with 10% or double-digit targeted in 2024. How do your parameters feel in today's market? Volume's growing a little bit faster than the economy, pricing above inflation, incremental efficiency gains, each of those three.
I can start, and then Pat can come in here. I feel pretty good when you look at, as you know, this year, you know, we have mid-single-digit volume growth. I think people were worried a little bit at the beginning of the year that we were banking too much on a positive economy. I think, as you know, half of that volume growth will come from CN-specific growth initiatives. They are happening as we speak. They're all being delivered as we, as planned. These are not necessarily, you know, connected to the economy per se. They're very specific client initiatives. Customers have invested in a lot of cases, like in Norcan, on the Norcan facility in Toronto.
It's, it's been a significant, investment, and we've started to move some cars there. So I think why I feel comfortable about these, Ken, and you and I, when we were in Europe, we've talked a bit, a little, a little bit about it, is because we're not banking on one initiative. It's, it's, it's a slew of different initiatives. It's diversified from a commodity standpoint, diversified from a geographic standpoint. So if we're wrong on one from a negative side, hopefully we're wrong on another one on the positive side, and you've got the law of compensating errors. So we're very comfortable on that. The economy is, is panning out pretty much the, the way that we, the way that we are thinking.
Like, I mean, when you look, we're not banking on a 2% industrial production, but when you look at industrial production, in Canada at least, it started to be positive 0.3 at the beginning of the year. It's now positive 0.9. And economists, as you know, they forecast very often and change by small increments 'cause they never, they can never be wrong. So the economy is there. As you know, there's 1% of growth that was related to the fact that we didn't assume that we would have a West Coast port strike. So I'm quite comfortable on the volume. Now, we'll see what happens with this labor environment, but, you know, if you push this aside, I'm quite comfortable there.
When you look at pricing, we continue to price above real inflation. We monitor this very carefully, a gain to do our double digit, it's not just one thing, little bit of pricing, little bit of volume. Then on efficiency, I think we will deliver operating leverage. We haven't given out a number. I think my friend here, maybe he'll be a little bit sandbagging here, but we'll see. We do have definite path. We have space on some of our trains, especially on the manifest side of things. We purposely did not reduce our train package last year when our volumes were down, 'cause we wanna keep good customer service.
And then lastly, share buyback in the current year does not give a whole lot, especially after financing, but it will help in the out years. And so I feel comfortable about the 10%, and then the 10%-15%, my view is, as you know, these CN-specific growth initiatives will have a compounding effect, 'cause now you'll have the full year effect of the ones this year and so on. And if the economy continues to do a little bit better and gets closer to the two, and we continue to improve our margins year in, year out, then I think that hopefully we'll, we'll move from the 10 to more the 12, 13, and maybe to the high end of the range to when we get to 2026. So I think, I'm quite comfortable.
Then the last piece I would say on all of this is, you can't have these results without the right team, and this is where we're focusing. I'm very pleased to have our new COO, Rémi Lalonde. He's gonna have big shoes to fill, and you know Doug very well. But he's fitting in very well, Rémi and our team. The team is gelling. We're having the right discussions. We trust each other. Then finally, we have a great board. We have a, you could say, a brand-new board. We have good rail expertise, good business expertise on our board. We have the right discussions, and at least, you know, like you and I know, you can have the best asset and the best track and the best network out there.
If you don't have the people and the right people in the right position to convert this into value, you have nothing. And so I would not underestimate the value of having the right team, and this team I'm ecstatic about.
One thing I was asked to clarify is, are you comfortable with double-digit earnings growth, even with a brief strike? I think you had mentioned that before.
We'll have to see, right? I mean, we're speculating. We'll have to see, you know, how long it would take number one, and we'd have to see as well how much of the catch-up. As you know, there's some commodities where, you know, it's kind of a timing type of thing, or it could be timing when you look at the bulk. Obviously, when there is some disruption in some way, shape, or form, you've got other sectors that go quite quickly to trucks, namely intermodal, domestic. Lumber, a little bit as well, especially on the short haul. And then, to your point, and we mentioned that, whether shipping lines now would call other ports on the West Coast and that could have a lingering effect.
And it's not speculative, if it happens, I mean, we lived it last year, so we don't know. So I'm not gonna speculate on whether or not we would meet guidance. But again, I'm crossing my fingers that this noise will be behind us sooner than later, and the best way to do it would be to have a negotiated deal, a negotiated settlement, ASAP, that would be win-win for all parties. That would be the best way to do it.
Wonderful. Well, good luck on that.
Thank you.
The target you mentioned, the incremental operating leverage as part of that thing to get to the double-digit growth.
You posted a 60.8% operating ratio last year. Does that mean we're looking at a sub-60 OR?
Not sure if it's a sub-60, but we need to do better. I'm not gonna. We purposely are not throwing a number out there, and as I said before, and I think other rails have done the same. O perating ratio is really the result of everything we do, but we know we have to improve our margins. And on this, maybe I can turn it over a little bit, if you don't mind, Ken, to Pat, on the operating side and what you're doing to make sure that we are being more efficient in 2024 versus 2023.
Yeah, I would say as it relates to leverage, and I'll start with the merchandise package. As Ghislain pointed out, we are seeing the train load and train length in our merchandise package is up year-over-year. And there's still room to grow without us getting to the point. You heard Ed Harris talk about this a lot, not to the point where we are having trains out there that don't fit our network. We still have room to grow that package and fit our network that continues to keep that velocity and that speed that we expect to see as one of our health of network metrics. So, we have seen the growth in intermodal tip over into about 5-6 new train starts off the West Coast, coming into Canada, all volume- related.
And as we see that volume continue, those trains are pretty well maxed out. So any, any additional intermodal volume, we will see some new train starts come from that, but there is room to grow into that merchandise package.
So I'm gonna stick on you for the operating ratio for one more 'cause, let's go near term for a second. Barring a strike, right, the operating ratio typically improves about 570 basis points from first quarter to second quarter. Can you talk about what would aid or detract from that historical average if we just talk about, I know you're not putting a number down, so that would suggest it goes from 63.5 to just shy of 58? So maybe your thoughts on what the parameters are.
So by the way, your 570 basis point, I had Stacy check your math on this one, and as people may know in the room or on webcast, Stacy used to be in marketing, but before that, she was our chief of internal audit. So we could debate, and we could have an off-site discussion on your 570 basis point, but we're not gonna give a guidance on OR in Q2. But, Ken, you know that, you know, when you look at seasonality in the railroad, especially railroad of the North in Canada, you know, the OR in Q1 typically is the highest. The OR in Q3 is typically the lowest, and you can look at the last 10 years, depending on if there's some extraordinary events that happened, but assuming there's none.
And then, you know, the OR in Q2 and Q4 is somewhat in the middle, and Q2 will depend on, you know, the spring and how, you know, the snow melts and the thawing season and so on. And in Q4, it depends on how the winter hits. Like, in some part of our network, people forget, but you are trick-or-treating under snow. So, it depends on how that hits. So, you know, you could expect, you should expect, obviously, that barring any extraordinary event, that Q2 OR will be better than Q1, but we're not gonna give a number. And you knew the answer to that.
Yeah, of course I did. So Patrick, you inherit a network from your CEO predecessor and perhaps PSR trainer, Ed Harris, who was famous for talking about the operating plan being sacred. How do you and Derek split the duties, and how do you ensure that the network ops continue this performance in this environment?
Well, first of all, I would say to speak to Ed Harris, I've had the opportunity in my career to have many great mentors. F or Ed to come back for one more round and have that opportunity to learn from a legend who was at the table as Precision Scheduled Railroading was a concept that turned into, probably, you know, the most popular operating model in the industry, was a great opportunity for me. I would say this, that Ed's comments about the plan is sacred is exactly what we believe. So our job is to make a plan that optimizes our network, run that plan efficiently, so that the marketing team can sell into that plan. We all believe that.
When we get off plan, it's our North Star. We work to get back to that plan. As far as how we divide up the duties, I'd say this: that it is at our core, it is our make the plan, run the plan, sell the plan. So in my team, we make the plan, and we look at that plan as how to best optimize our network, get the cars as deep into the network as possible without handling them again, so that we have the least amount of assets being cars and locomotives and crews out there to handle the business that's coming on. And we continue to iterate that plan in conjunction with Derek's team, who is running the plan, and that's really where we are aligned is.
One problem you see in the railroad industry is, when you see operating metrics dip, it becomes this debate of, is it plan or is it execution? Derek and I are completely aligned on, here's the plan. Until we have run that plan and found the, you know, where are the issues with that plan and where can we iterate it and make it better, until we've given it a chance to run, we're not just gonna change it for the sake of continuing to change it. The plan is sacred, and if we've run it, and we cannot make it work, then we will change the plan, to make sure that it is executable in the field, and we are perfectly aligned on that.
You know, in my team, I now also have engineering and mechanical, and it's the same philosophy and the same mantra in those departments. It's, we're gonna make the plan, we're gonna run the plan to, to make sure that we deliver for our customers.
Let me add a few points on this, in very layman's term, the way I see this, 'cause I've been around for many years. So because we're a network business and because the traffic never really runs the way that you had planned it 100%, especially when you're a 20,000-mile network. The CO typically will go in, and they will look at the metrics, they will look at the traffic, and they will look at where the fires are, and they'll put them out. And they become experts at exception management, and when there's no fires, they'll create a few because they're good at it, and they wanna put them out. This is Derek's job.
In the past, because they're so busy doing this, they spend less time on the little bit to, you know, they spend less time on the medium to long-term planning, capital planning. Spend a little less time on engineering and mechanical. People forget, but engineering at CN is like a CAD 3 billion construction company. Spend less time on this. Spend less time on mechanical. We know that locomotive reliability is key, especially in a single-line network. You cannot have locomotive scrap on you, especially depending on where it does, it could be very detrimental. So with this structure, that allows Pat to look at the longer-term planning. That allows Pat to dig in into engineering, mechanical, more than what he would've been able to do in the past.
I'm happy, we've just promoted now a new person in engineering as we speak, and I think we will find opportunities there because the budget and, you know, the cost center is so big, it's one of the biggest in the company, that just a small, you know, advantage, just a small benefit, either capital or operating, will make a difference. So it allows him now to elevate himself from the pure day-to-day and focus on some of these things, which in the past, he would not have had the time to do.
So CN was kinda innovative in getting us to look at RTMs versus car loads. You know, Jim Vena, and now former CN, now at UP talks a lot about car miles per day, right, as, as how to look at the network versus velocity and dwell, which are metrics that we get, 'cause it's what the STB is reported to the STB. How do you look at the network in terms of understanding if things are on time? Is it car miles per day? Is it first mile, last mile? What is the most important thing to really figure out how efficient and on time the network is doing?
So to that point, I will say that was one of the first things that Ed Harris focused on was, it's about the car miles per car day. And let me say it this way, it is truly about the balance of all of those health of network metrics. So, really, when I look at it, it's, we're looking at the train speed to make sure that we see where any of the issues are across the network that are slowing trains down. It's about that car velocity or the car miles per car day, interchangeable terms, to know that at the car level, the cars are getting as deep into the network as we need them to. And then it's about the terminal dwell. How quickly is Derek's field team processing cars through the terminals?
Which, as you look at it, our true terminal dwell is lowest in the industry, processing cars through terminals. At the end of the day, I look at all of those, though, as health of network. At the end of the day, our Local Service Commitment Plan , where all of those things have gone well, those cars are at that final terminal, and that local is going out to service the customer. We're doing that at nearly 95% of the commitment that we've made to our customers. So yes, we watch all of the metrics to make sure that the health of the network is where we need it to be, but at the end of the day, it's that that car is at that final terminal, and we're adding value for our customer.
I'm gonna ask you to try and be quick. But we're gonna talk about.
That's gonna be tough.
We're gonna talk about kinda M&A potential, right? So, you know, the end of the railroad M&A period, large-scale mergers, you've talked about as being over. You're in the midst of acquiring Iowa Northern, so we're seeing some regional acquisitions. All around the network, we're seeing some of these go on. You've talked more about maybe little tuck-ins, but also the partnerships, the alliances, are really the next phase of railroad efficiency. You wanna talk to us?
I think just a couple of points. I mean, and we've talked about this, you and I, in Europe. There's basically, when you're a railroad, three ways that you can grow volume. Very simple. You either grow with your customers, or you convince somebody to build a line on your network, and we're blessed to have the network of the North. So we have at CN, and we have therefore better access to Canada's natural resources, and then you've gained the customer's commitment for the next 30 years, or you need to extend your network reach. And therefore, we are open, you know, to extend our reach through an acquisition. We know it's not gonna happen through Class 1s. The STB has spoken, but, you know, Iowa Northern is a good example, where it's contiguous.
Any line that's contiguous to our railroad, that will bring us to geographic markets that we can't have access on our own, at the right price, we're interested, and we have the balance sheet to do that and to do it quickly. And then the last piece, to extend your network reach, will be through partnerships, and that's why I'm so bullish with our partnership we have with UP. I think that, you know, when you look at our service from Monterrey to Toronto, five-day service, is truck-like. And the key here is exactly to convert long-haul trucking back to railroad, which have been the most over-promised and least under-delivered in the last 10, 15, 20 years. When you look at market share between railroads, over long term, it's a zero-sum game.
We brag about a contract, competitors will brag about another one that they gain from us, but it's a zero-sum game. Where the industry needs to do is get that truck, long-haul trucking back on the rails, and there's more long-haul trucking than people actually think. And that's what we're all about, and you can expect that there will be more of these partnerships in the industry going forward. And I think that, you know, our partnership with UP going to Mexico will be the role model of how partnerships have to be operationalized and to execute and to have a consistent transit time that are competitive to trucks to gain market share back. And it's a win-win because it gives us access to network reach in Mexico, and it gives UP access everything north of Chicago.
So maybe one last point on concluding, again, as you know, I've been around for over 25 years. I've seen the good years. I've seen the years that have been a little bit more challenging. I can say that we're having fun at CN. I can say that the team is coming together. I can say that the, you know, the management team has a lot of trust within ourselves, have a lot of trust with the board. I think we're discussing the right things together. I think we are challenging each other, but we're doing it in a constructive and in a fun way. And I think that under Tracy's leadership, I think that CN is in good hands for the next years to come.
So if I were to kinda sum up what we just talked about, right? So things are performing to plan, as you mentioned, RTMs up 9% quarter to date. Network is fluid. I think Patrick kinda hit on, on kind of some of the key, key points there. Labor discussion is ongoing. New wrinkle as of late, right? We might have a, just a little extension to the May 22nd deadline, or we will have one. Double-digit earnings, EPS growth, it continues, again, without the strike, confident in hitting those targets. OR improvement, 1 Q to 2 Q, we should see Stacy for the exact level, since you're not putting it out there.
Yeah.
Anything else you would throw out there?
No, thanks for having us.
All right. Wonderful.
Happy to be here.
Thank you for having us.
Thank you so much for joining us.