Canadian Pacific Kansas City Limited (CP) Earnings & Analysis

Latest quarter

Canadian Pacific Kansas City reported Q2 FY2026 revenue of $3.0 billion, above the consensus estimate of $2.9 billion. Adjusted earnings per share, as counted by the consensus, were $0.92, above the $0.89 estimate.

The company reported revenue up from $2.7 billion a year earlier, while diluted earnings per share fell to $0.83 from $0.96. In its management discussion, CPKC attributed higher freight revenue to increased volumes and higher revenue per unit of freight moved. The company said grain and intermodal revenue rose, while coal revenue fell amid lower Canadian and U.S. volumes.

CPKC reported an operating margin of 35.4%, compared with 36.3% a year earlier, and a gross margin of 67.5%, compared with 70.2%. The company reported free cash flow of $694.2 million, up from $448.5 million in the prior-year quarter.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

Chief Commercial Officer John said he expected grain demand to continue through Q3, although the timing of the harvest remained a question. He also expected the coal-related effect on revenue in Q3 to resemble Q1 before improving progressively toward year-end. John said the coal customer had seen production improve and expected mining capability to return to prior-year levels in 2027.

John said refined-fuels shipments into Mexico had been substantially disrupted in recent months. He said CPKC had its supply chain and customs processes in place to serve that business when market conditions allow, but could not say exactly when it would return.

On pricing, John said renewals were within the company’s multi-year guidance range and could potentially accelerate, depending on trucking conditions and inflation. He also said longer-haul land bridge opportunities could affect the company’s traffic mix.

Asked how CPKC would match resources to its growth plans, Chief Operating Officer Mark said the railway was assessing crews, locomotives and equipment in advance of demand. He said a newly signed agreement could provide staffing synergies and that the company had opportunities to combine trains and adjust work schedules. Nadeem said the company could accommodate growth within its FY2027 capital envelope.

CEO Keith Creel said the proposed Union Pacific–Norfolk Southern merger would reduce competitive options and create operational risk. He acknowledged that its supplemental submission addressed CPKC’s concerns about control of the KCT terminal and TRRA. Asked about customer reactions to industry developments, Creel said customers he had engaged wanted to preserve competitive options, while John said they were seeking more supply-chain alternatives.

Guidance

John said CPKC expects continued grain demand through Q3 FY2026 and a coal-related revenue impact similar to Q1. He also reiterated a $600.0 million land bridge revenue run rate for FY2026. Nadeem said the company expects FY2027 capital expenditure of $2.6 billion to $2.7 billion.