Canadian Pacific Kansas City Limited Common Shares
CP · NYSE
Next quarter
Expected to report Oct 28, 2026 — estimated from last year’s reporting date.
Consensus is $0.95 EPS for Sep 2026 across 7 estimates, ranging $0.93 to $0.98.
CP Jun 2026
- 3.37%
- -3.43%
- $0.89
- $0.92
- —
- $4.14B
Reported results
- $4.14B
- $1.47B
- 35.58%
- $1.02B
- $1.15
Highlights
- Underlying earnings: Core adjusted diluted EPS rose 13% year over year to $1.27, while the supplied analyst comparison shows reported EPS of $0.92 versus a $0.89 consensus estimate, a 3.37% surprise.
- Revenue growth: Second-quarter revenue increased 13% year over year to $4.164 billion, driven by 13% growth in freight revenue to $4.088 billion and higher fuel surcharge revenue.
- Operating performance: Operating income rose 10% to $1.472 billion, although the reported operating ratio worsened 90 basis points to 64.6%; the core adjusted operating ratio also increased 90 basis points to 61.6%.
- Volume and pricing: Revenue ton-miles increased 4% and freight revenue per revenue ton-mile rose 9% to 7.10 cents, with $257 million of revenue benefit from higher fuel surcharge recoveries.
- Mix of freight: Grain revenue grew 24% to $925 million, Automotive rose 22% to $403 million, and Metals, minerals and consumer products increased 18% to $524 million; Coal declined 18% to $209 million.
- Cost pressure: Operating expenses increased 14% to $2.692 billion, including a $213 million increase in fuel expense and a $64 million increase in compensation and benefits.
- Cash returns and liquidity: Operating cash flow rose 27% year over year to $1.726 billion; CPKC repurchased 10.9 million shares for $1.298 billion and declared a quarterly dividend of $0.268 per share.
- Leadership and balance sheet: Isabelle Courville retired as board chair and Gordon Trafton succeeded her; at quarter-end, cash was $366 million, commercial paper borrowings were $1.461 billion, and long-term debt including current maturities was $23.686 billion.
Analysis
CPKC delivered a solid operating quarter beneath a noisy year-over-year comparison. Revenue of $4.164 billion rose 13% from $3.699 billion a year earlier and increased about 14% from $3.67 billion in the prior quarter. Operating income reached $1.472 billion, up 10% year over year and 17% sequentially. GAAP net income fell 17% to $1.024 billion and diluted EPS declined 14% to $1.15, but the year-ago period included a $333 million pre-tax gain on the sale of the Panama Canal Railway investment. Excluding significant items and KCS purchase accounting, core adjusted EPS increased 13% to $1.27, while the supplied consensus comparison showed $0.92 of reported EPS against expectations of $0.89.
The print was defined by broad freight growth, fuel pass-through and rising costs. Revenue ton-miles grew 4%, while yield increased 9% to 7.10 cents per revenue ton-mile, helped by $257 million of higher fuel surcharge revenue. Grain, automotive and metals drove the strongest commodity gains, partly offset by an 18% decline in coal. Fuel expense rose 53% to $618 million, largely reflecting $200 million of higher fuel prices, and the operating ratio deteriorated 90 basis points to 64.6%. Cash generation remained strong, supporting $1.298 billion of buybacks and $204 million of dividends paid during the quarter.
Revenue and freight mix
CPKC’s top-line growth was broad but relied on both volume and yield. Freight revenue rose 13% to $4.088 billion, while non-freight revenue increased 9% to $76 million. Revenue ton-miles grew 4% to 57.6 billion and freight revenue per revenue ton-mile increased 9% to 7.10 cents. Higher fuel surcharge revenue contributed $257 million to revenue, alongside higher freight rates and a $21 million favorable foreign-exchange effect.
- Grain: Revenue increased 24% to $925 million, with carloads up 18% and revenue ton-miles up 19%, reflecting stronger Canadian and U.S. grain flows to Mexico, western Canada and the U.S. Midwest.
- Automotive: Revenue rose 22% to $403 million as longer-haul Mexico-to-Canada, Vancouver-to-eastern-Canada and Ontario-to-Mexico traffic increased.
- Metals, minerals and consumer products: Revenue grew 18% to $524 million, supported by higher steel and sand-and-stone volumes.
- Intermodal: Revenue increased 11% to $758 million, despite a 1% decline in carloads, as domestic wholesale and cross-border traffic and pricing offset weaker international volumes at Vancouver and Saint John.
- Coal: Revenue declined 18% to $209 million as Canadian mine and port maintenance reduced volumes; revenue ton-miles fell 29% and carloads fell 20%.
Margins and cost inflation
Operating income grew more slowly than revenue, rising 10% to $1.472 billion. The reported operating ratio worsened from 63.7% to 64.6%, and the core adjusted ratio increased from 60.7% to 61.6%. Fuel surcharge mechanisms provided some protection against fuel inflation, but the quarter still showed substantial cost pressure.
- Fuel: Expense rose 53% to $618 million, primarily because higher diesel benchmark prices increased costs by $200 million; improved fuel efficiency and higher surcharge revenue partly offset the pressure.
- Compensation: Expense increased 10% to $723 million, including a $35 million increase in stock-based compensation, wage and benefit inflation, and volume-related costs. Average employees declined 2% to 19,835 after systems integration was completed.
- Other operating costs: Depreciation and amortization rose 5% to $519 million as the depreciable asset base expanded, while purchased services and other increased 6% to $605 million due partly to casualty costs and $14 million of advisory spending related to the proposed Union Pacific-Norfolk Southern merger review.
- Adjusted earnings: Core adjusted EPS of $1.27 excluded 3 cents of acquisition-related costs, 1 cent of rail-consolidation advisory costs and 8 cents of KCS purchase accounting.
Cash flow and capital returns
Cash generation strengthened despite heavy shareholder distributions and capital spending. Operating cash flow increased 27% year over year to $1.726 billion, while additions to properties were $758 million in the quarter. Financing cash outflows were $1.031 billion, including buybacks, dividends and debt repayment, partly offset by $778 million of net commercial paper issuance.
- Buybacks: CPKC repurchased 10.9 million shares for $1.298 billion in the quarter at a weighted-average price of $119.60. The six-month total was 16.6 million shares and $1.944 billion, leaving 28.3 million shares authorized for repurchase.
- Dividend: The company declared a quarterly dividend of $0.268 per share, up from $0.228 a year earlier; dividends paid during the quarter were $204 million.
- Debt funding: During the first half, CPKC issued $1.642 billion of U.S. dollar notes, including three-year notes at 4.00% and 30-year notes at 5.50%, while repaying $684 million of maturing notes.
- Liquidity: Cash ended the quarter at $366 million. The $2.2 billion revolving credit facility was undrawn, while commercial paper borrowings stood at $1.461 billion.
Year-over-year earnings comparison
The headline decline in GAAP earnings is primarily a comparison effect rather than a deterioration in the railway’s underlying operating result. Second-quarter net income was $1.024 billion versus $1.234 billion in 2025, and diluted EPS was $1.15 versus $1.33. The 2025 result benefited from the $333 million pre-tax gain on the sale of CPKC’s Panama Canal Railway investment. Net interest expense also rose 14% to $237 million as debt issued in 2025 and 2026 increased interest costs.
- Underlying trend: Core adjusted EPS rose from $1.12 to $1.27, and first-half core adjusted EPS increased from $2.18 to $2.30.
- Tax rate: The reported effective tax rate increased to 24.65% from 22.45%, while the core adjusted tax rate was 24.75% compared with 24.50% a year earlier.
- Share count: Average diluted shares fell to 887.1 million from 924.8 million, reflecting the company’s ongoing repurchases.
Board succession
CPKC announced the immediate retirement of board chair Isabelle Courville and appointed long-serving director and vice-chair Gordon Trafton as chair under its succession plan. Courville chaired the board from 2019 through the completion of the CP-Kansas City Southern combination. Trafton has served on the board since 2017 and brings a 33-year railroad career, including senior operating and acquisition-integration roles at Canadian National.
