Canadian Pacific Kansas City Limited Common Shares
CP · NYSE
Next quarter
Expected to report Jan 27, 2027 — estimated from last year’s reporting date.
Consensus is $1.10 EPS for Dec 2026 across 8 estimates, ranging $1.06 to $1.19.
CP Sep 2026
- 3.19%
- -1.19%
- $0.94
- $0.91
- —
- $4.19B
Reported results
- $4.19B
- $1.49B
- 35.47%
- $917.00M
- $1.04
Highlights
- Revenue growth: Q3 revenue rose 15% year over year to C$4.219 billion, with revenue ton-miles up 6% and freight revenue per ton-mile up 9%.
- Core earnings: Core adjusted diluted EPS increased 16% to C$1.28 from C$1.10; operating income grew 11% to C$1.487 billion.
- GAAP EPS discrepancy: The release and 10-Q report diluted EPS of C$1.04, up 3% from C$1.01 a year ago. The supplied estimate snapshot instead lists reported EPS of C$0.91 versus C$0.94 consensus (-3.2%), which does not reconcile to the filed result.
- Margins pressured: Reported operating ratio deteriorated 130 basis points to 64.8%; core adjusted operating ratio rose 120 basis points to 61.9%. Higher fuel prices weighed 170 and 190 basis points on the respective ratios.
- Fuel headwind: Fuel expense increased 61% to C$667 million, including a C$216 million impact from higher fuel prices; fuel surcharges added C$271 million year over year to revenue.
- Tax charges: A C$94 million CRA reassessment and C$17 million Mexican tax settlement contributed to the higher reported tax rate of 32.79%, versus 24.34% a year ago.
- Cash generation: Operating cash flow was C$1.550 billion, and adjusted free cash was C$1.018 billion, up from C$415 million a year earlier.
- Shareholder returns: CPKC repurchased 11.5 million shares for C$1.487 billion and declared a dividend of C$0.268 per share, versus C$0.228 a year ago.
Analysis
CPKC delivered strong top-line growth and higher adjusted earnings, but fuel inflation and discrete tax costs muted the GAAP result. Revenue increased 15% year over year to C$4.219 billion and operating income rose 11% to C$1.487 billion. Reported diluted EPS was C$1.04, versus C$1.01 a year ago, while core adjusted diluted EPS advanced 16% to C$1.28. Sequentially, revenue edged up from C$4.14 billion in Q2, but EPS fell from C$1.15 and operating income was little changed from C$1.47 billion. The release and filing report C$1.04 diluted EPS; the supplied estimate snapshot instead gives C$0.91 reported against C$0.94 consensus, an inconsistency that prevents a reliable comparison with expectations from that snapshot.
The defining operating story was broad freight growth, led by grain and intermodal, alongside a significant fuel-cost squeeze: the reported operating ratio worsened 130 basis points to 64.8%, although management attributed 170 basis points of pressure to fuel prices. Tax items also weighed on GAAP earnings, including the C$94 million CRA reassessment. CPKC generated C$1.550 billion in operating cash and C$1.018 billion in adjusted free cash, repurchased C$1.487 billion of shares, and said it remained on track to meet its 2026 commitments.
Earnings and margin
Revenue growth flowed through to higher operating income, but the cost ratio moved in the wrong direction. Reported net income attributable to controlling shareholders was C$917 million, slightly below C$920 million a year earlier; the lower diluted share count helped lift EPS 3% to C$1.04. Adjusted measures show stronger underlying growth, while excluding specified items including KCS purchase accounting and discrete tax charges.
- Reported performance: Revenue was C$4.219 billion versus C$3.661 billion; operating income was C$1.487 billion versus C$1.336 billion.
- Adjusted performance: Core adjusted EPS rose to C$1.28 from C$1.10, while core adjusted operating ratio increased to 61.9% from 60.7%.
- Sequential comparison: Versus Q2 FY2026, revenue increased from C$4.14 billion and operating income from C$1.47 billion, while diluted EPS declined from C$1.15.
Volume and pricing
Growth combined more freight with better revenue per unit. RTMs rose faster than carloads, reflecting a mix that included longer-haul grain movements. Higher fuel surcharge revenue and freight rates supported yield; the reported revenue increase also included a favorable foreign-exchange contribution.
- Network activity: RTMs increased 6% to 57.5 billion and carloads rose 5% to 1.191 million.
- Yield: Freight revenue per RTM increased 9% to 7.20 cents; management cited higher fuel surcharges, freight rates and C$65 million of favorable FX impact.
- Key contributors: Grain revenue grew 29% to C$904 million, supported by higher volumes; intermodal rose 22% to C$815 million, with higher international volumes at Vancouver and Montréal and domestic wholesale volumes.
- Other mix: Metals, minerals and consumer products revenue increased 16% to C$532 million. Coal RTMs fell 11%, leaving coal revenue essentially flat at C$254 million.
Fuel and operating costs
Higher activity and improved fuel efficiency were not enough to offset the sharp rise in fuel prices. CPKC said fuel-price effects added C$244 million to revenue and C$216 million to operating expense; timing differences in surcharge recovery affected the benefit. Overall, the reported operating ratio deteriorated 130 basis points, while management estimated a 170-basis-point fuel impact.
- Fuel expense: Increased 61% to C$667 million; the average locomotive fuel price rose 53% to US$4.49 per gallon.
- Surcharge recovery: Fuel surcharge revenue increased 76% to C$629 million, partly reflecting higher prices and volumes.
- Efficiency: Fuel efficiency improved 3% to 0.990 U.S. gallons per 1,000 GTMs; average train speed rose to 20.5 mph from 19.0 mph and terminal dwell improved to 9.4 hours from 10.1.
Tax and legal items
Discrete tax expenses widened the gap between GAAP and core adjusted earnings. The quarterly effective tax rate was 32.79%, while the core adjusted rate was 24.75%. The CRA reassessment related to the KCS acquisition and the Mexican settlement were excluded from core adjusted results; the reassessment remains partly disputed. Separately, CPKC reported October developments that reduce several legacy Lac-Mégantic claims.
- CRA reassessment: CPKC recorded C$94 million for prior-year tax positions it did not contest; it has objected to other assessed positions and says reserves are sufficient.
- Mexico: A settlement of 2020 and 2021 tax matters resulted in C$17 million of tax expense and a C$20 million payment; 2016–2019 tax years remain disputed.
- Lac-Mégantic: The Supreme Court of Canada had dismissed leave applications in May 2026; in October, the Québec court dismissed two related actions and the province agreed to annul the cleanup order and related notices.
Cash flow and capital returns
Cash generation improved year over year while the company continued substantial repurchases and investment in its network. Adjusted free cash excludes specified items and should be considered alongside GAAP operating cash flow. The balance sheet showed C$25.846 billion of long-term debt including current maturities at quarter-end; adjusted net debt to adjusted EBITDA was 3.2 times, unchanged from a year earlier.
- Cash generation: Operating cash flow was C$1.550 billion versus C$1.274 billion; adjusted free cash was C$1.018 billion versus C$415 million.
- Investment: Additions to properties were C$613 million, down from C$860 million in Q3 2025.
- Capital returns: CPKC repurchased 11.54 million shares for C$1.487 billion and declared C$0.268 per share in dividends.
- Debt: Cash and equivalents were C$399 million at September 30. On October 6, CPKC issued C$1.8 billion of notes across four maturities.
