CPKC reported stronger third-quarter operating income Wednesday, on record revenue and higher volumes.
“Against a pretty dynamic backdrop, I’m pleased with what the team has delivered,” Chief Executive Keith Creel said on an earnings call after the close of markets.“We handled 6% more volume while continuing to improve the performance of the railroad, and more importantly, there is so much more opportunity in front of us.”
Quarterly operating income rose 11%, to $1.06 billion U.S., as revenue increased 15%, to $3 billion. Earnings per share grew 3%, to 74 cents.
The improved performance didn’t extend to the operating ratio, a key indicator of efficiency. The OR was 64.8%, a 1.3-point increase over a year ago as expenses climbed 18% largely due to higher fuel costs.
Volume was up 5% when measured by carloads and containers, or 6% on the basis of revenue ton-miles, which is CPKC’s preferred metric.
The Calgary-based company (NYSE: CP) set records for domestic and international intermodal volumes, as well as for grain. Grain carloads were up 20%, intermodal was up 9%, and metals, minerals, and consumer products traffic grew 8%. Potash and coal volume each declined 8%. Potash shipments were curtailed due to maintenance at port loading facilities, while mine production issues suppressed coal volume.
International intermodal volume was up 11% and domestic up 7% based on RTMs, Chief Marketing Officer John Brooks said. The railway’s Southeast-Mexico SMX interline service with CSX grew 30% compared to the second quarter.
Excluding coal, CPKC’s third-quarter revenue ton-miles are up 17% since the 2023 Canadian Pacific-Kansas City Southern merger. “That performance, despite a tough macro backdrop, is driven by disciplined commercial execution, self-help initiatives, and strategic share gains,” he said. “And our strong service product network fluidity and available capacity provide the foundation for this growth.”
CPKC’s Canada-Mexico land bridge business — which became a point of emphasis amid trade tensions and U.S. tariffs — are on a pace to reach $427 million U.S. this year, up from $71 million at the time of the CP-KCS merger.
“This is not growth we inherited,” Creel said. “It’s growth that we created, taking a challenge and turning that challenge into an opportunity, creating new markets enabled by this unique North American network.”
The railway announced a new contract with Elk Valley Resources, which operates four metallurgical coal mines in southern British Columbia. CPKC originates all of the coal but currently hands it off to rival Canadian National at Kamloops, B.C., for forwarding to tidewater and export through Vancouver. Under the new five-year deal, CPKC wins back 50% of the Vancouver-bound coal volume, or about 1.5 trains per day, Creel said.
CPKC’s key operational metrics improved, with average train speed up 8% and terminal dwell down 7%, which resulted in car-miles per day improving 10%. Fuel efficiency improved 3%.
The railway’s new locomotives — 170 ET44ACs from Wabtec and SD70ACe-T4s that are beginning to arrive from Progress Rail — are saving on fuel costs and reducing service failures, Chief Operating Officer Mark Redd said.
“The newer locomotives have contributed to more than 35% reduction in our service interruptions on our 100-series trains in Canada, a 10% reduction in interruptions in our Western Canadian grain fleet, while improving fuel efficiency on both services,” he said. The 100-series trains are CPKC’s highest-priority intermodal trains.
CPKC’s safety metrics were mixed for the quarter. The train accident rate improved 60%, but the personal injury rate was up 20% compared to last year’s third quarter. “The increase of the personal injuries does not meet our standard,” Redd said.
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