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Introduction & Market Context
Canadian Pacific Kansas City Limited (NYSE:CP) reported its second quarter 2025 financial results on July 30, 2025, showing solid revenue growth and significant earnings improvement despite mixed operational performance. The railway operator, which completed the merger between Canadian Pacific and Kansas City Southern (NYSE:KSU) in 2023, continues to leverage synergies from the combined network spanning Canada, the United States, and Mexico.
The company’s stock closed at $76.19 on the day of the earnings presentation, down 0.55% from the previous close, but remains well above its 52-week low of $66.49.
Quarterly Performance Highlights
CPKC reported Q2 2025 revenues of $3.7 billion, representing a 3% increase compared to the same period last year. The company’s diluted earnings per share surged 37% to $1.33, while core adjusted diluted EPS rose 7% to $1.12.
The railway’s operating ratio improved by 110 basis points to 63.7%, with the core adjusted operating ratio also improving by the same margin to 60.7%. Revenue ton miles (RTMs), a key volume metric for railroads, increased by 7% to 55,529 million.
As shown in the company’s quarterly highlights slide, CPKC attributes its performance to solid base demand and synergies driving differentiated volume growth, along with creating new opportunities through its entrepreneurial approach:
Segment Performance Analysis
CPKC’s performance varied across its three main business segments. The Bulk segment, which includes grain, coal, potash, and fertilizers, delivered 6% FX-adjusted revenue growth on 9% higher RTMs. This was driven by increased Canadian grain export shipments from the 2024/2025 harvest and higher U.S. grain shipments to Mexico. Coal volumes also benefited from strong mine production and inventory draw-downs.
The Merchandise segment faced challenges, with FX-adjusted revenue declining 1% on 3% lower RTMs. Within this segment, Energy, Chemicals & Plastics (ECP) showed growth from synergies and market share gains, partially offset by lower crude volumes. Forest Products was impacted by softer base demand, while Metals, Minerals & Consumer products felt the effects of steel tariffs. However, the Automotive subsegment continued to deliver record volumes through synergy-enabled closed-loop service solutions.
The Intermodal segment was a standout performer with 8% FX-adjusted revenue growth on an impressive 18% RTM increase. This was driven by strong International Intermodal performance from the Gemini alliance growth out of CPKC-served ports and robust Domestic Intermodal growth from record MMX180/181 service performance.
The following slide details the revenue performance across these segments:
Operational Challenges and Improvements
CPKC reported mixed operational metrics for the quarter. While the company achieved improvements in average train length (+1% to 7,844 feet) and average train weight (+1% to 9,187 tons), it faced challenges in other areas. Average terminal dwell time increased by 7% to 10.2 hours, and FRA train accident frequency deteriorated by 39% to 0.97 per million train-miles. On a positive note, FRA personal injuries improved by 8% to 0.77 per 200,000 employee-hours.
The company acknowledged that its metrics were impacted by complex systems integration, particularly in the southern U.S. network. However, management highlighted strong progress over the last two months on the Legacy KCS U.S. network, with dwell time improving 42% and car miles per car day improving 38%.
The operational performance metrics are illustrated in the following slide:
Financial Position and Cash Flow
CPKC demonstrated strong financial performance beyond the top-line metrics. Net income attributable to controlling shareholders increased by 36% to $1,234 million, while core adjusted income rose 5% to $1,036 million.
The company’s cash flow generation remained robust, with net cash provided by operating activities increasing 6% to $1,355 million. Adjusted free cash flow grew 15% to $605 million. The company maintained an adjusted net debt to adjusted EBITDA ratio of 3.0.
CPKC continued to reward shareholders through its share repurchase program, which was 44% complete as of the end of Q2 2025. The company has repurchased 16.4 million shares since the program was announced.
The comprehensive financial results are detailed in the following slide:
The company’s strong cash flow generation is highlighted in this slide:
Forward Outlook and Strategic Initiatives
CPKC reaffirmed its 2025 outlook, projecting 10-14% growth in core adjusted diluted EPS compared to 2024’s core adjusted diluted EPS of $4.25. The company expects mid-single-digit RTM growth and has budgeted capital expenditures of $2.9 billion for the year.
Looking further ahead, CPKC outlined its long-term growth outlook for 2024-2028, targeting high single-digit revenue growth and double-digit core adjusted EPS growth. The company plans capital expenditures of $2.6 to $2.8 billion per year and expects adjusted free cash conversion of core adjusted income of approximately 90%. Management also anticipates a return to double-digit core adjusted return on invested capital (ROIC) and strong margin improvement through cost control and operating leverage.
The company’s 2025 outlook is presented in the following slide:
CPKC’s long-term growth outlook through 2028 is detailed here:
The company also highlighted its sustainability initiatives, including the publication of its 2024 Sustainability Data Report, continued biofuel trials in British Columbia, and progress on its hydrogen locomotive program. CPKC joined Clean Fuels Alliance America and continues to invest in community programs, including raising a record $4.3 million for heart health at the 2024 CPKC Women’s Open.
CPKC’s Q2 2025 results demonstrate the company’s ability to generate revenue and earnings growth despite operational challenges. With a clear strategic roadmap and continued focus on leveraging synergies from the CP-KCS merger, the railway operator appears well-positioned to deliver on its long-term growth targets while advancing its sustainability initiatives.
Full presentation:
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