Canadian Pacific Kansas City profits and revenue grew in the second quarter as the railway carried more intermodal, grain, and coal shipments.
Chief Executive Keith Creel said the elephant in the room — the proposed Union Pacific (NYSE: UNP)-Norfolk Southern (NYSE: NSC) merger — does not change the growth opportunities his railway enjoys thanks to its unique cross-border network linking Canada, the U.S., and Mexico.
“This franchise continues to be positioned to deliver a unique outcome for years to come,” he said on the railway’s earnings call Wednesday afternoon.
Creel affirmed CPKC’s (NYSE: CP) long-term financial guidance despite the impact of ongoing trade tensions, such as the 50% tariffs the U.S. has imposed on steel imports from Canada. The tariffs have effectively stopped U.S.-bound steel shipments, Chief Marketing Officer John Brooks said.
CPKC saw strong international intermodal growth thanks to its Gemini partnership with Maersk and Hapag Lloyd, enjoyed 40% growth in its Mexico Midwest Express domestic cross-border intermodal hotshots, as well as a continued ramp-up in land-bridge traffic between Canada and Mexico.
CPKC’s quarterly operating income increased 6%, to $970 million U.S., as revenue grew 3%, to $2.67 billion U.S., compared to a year ago. Earnings per share surged 37%, to 96 cents.
The railway’s operating ratio was 63.7%, a 1.1-point improvement.
Overall volume was up 6% based on carloads and containers, but 7% when measured by revenue ton-miles.
On a carload basis, the growth was led by a 14% increase in intermodal shipments, an 11% increase in grain, and 9% increase in coal volume. Energy, chemicals, and plastics traffic was flat. The rest of CPKC’s segments — potash; fertilizers; forest products; metals, minerals and consumer products; and automotive — showed declines.
Average train speed was flat, but terminal dwell increased 7% partly due to the impact of congestion in former Kansas City Southern territory in the U.S. after a problematic May 3 computer systems cutover. The tech problems created congestion, missed switches, and significant delays for customers in Louisiana, Texas, and Mississippi.
CPKC has made significant progress clearing up congestion on the legacy KCS lines in the U.S., Chief Operating Officer Mark Redd says, citing a 42% improvement in dwell and a 38% increase in car miles per day.
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Find more articles by Stuart Chirls here.
Related coverage:
While shippers cite concerns, rival railroad sees ‘value’ in mega-merger
CEOs say Union Pacific-Norfolk Southern merger will reverse rail freight decline
Shippers line up against railroad mergers
Union Pacific and Norfolk Southern reach $85 billion merger deal
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