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CP

CANADIAN PACIFIC KANSAS CITY LTD/CN (CP)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered $3.80B revenue (+8% y/y), diluted EPS $0.97, Core adjusted diluted EPS $1.06, and Core adjusted OR 62.5% amid tariff and FX uncertainty .
  • Results were modest beats versus Wall Street: EPS $0.74 vs $0.73*, revenue $2.64B vs $2.61B* (SPGI USD basis); guidance trimmed to 10–14% Core adjusted EPS growth (prior 12–18%) due to tariffs and FX .
  • Operational resilience: RTMs +4%, OR improved 210 bps to 65.3%, record safety performance (FRA accidents 0.38; injuries 0.98) .
  • Capital returns re-accelerated: new 4% buyback already ~3.5M shares in March, and dividend hiked 20% to $0.228/quarter (payable July 28) .
  • Near-term catalysts: policy/FX normalization, continued Gemini/St. John/Lázaro intermodal ramp, and expected ~$230M pre-tax gain in Q2 from Panama Canal Railway sale .

What Went Well and What Went Wrong

What Went Well

  • Core execution: OR improved 210 bps to 65.3% and Core adjusted OR to 62.5%; operating income +15% y/y to $1.317B .
  • Bulk strength and autos: Grain +8% revenue (record Q1), Potash +14%, Coal +23%, Automotive +19%; RTMs +4% overall .
  • Safety and operations: FRA train accidents per million train-miles fell to 0.38 (−58% y/y); locomotive productivity +3%; record March GTMs despite extreme cold .
  • Quote: “Crisis creates opportunities… this unparalleled 3 nation network is uniquely built for times like this” — Keith Creel .
  • Commercial momentum: MMX 180/181 intermodal volumes +42% in Q1; Schneider auto parts service launched; Gemini alliance ramp at St. John and Vancouver .

What Went Wrong

  • Guidance trimmed on macro: EPS growth reduced to 10–14% (from 12–18%) due to tariff uncertainty and CAD FX headwind (~2 pts) .
  • Cost pressures: Materials expense +32% y/y (parts agreement and weather), equipment rents +21% y/y, depreciation +8% y/y .
  • Network metrics: terminal dwell increased to 10.3 hours (+6% y/y) amid winter impacts; intermodal revenue per RTM modestly pressured .
  • Tariff exposure pockets: choppiness in autos and steel cross-border flows, though teams are offsetting with Canada–Mexico land-bridge solutions .

Financial Results

Consolidated Financials (CAD)

MetricQ3 2024Q4 2024Q1 2025
Revenue ($CAD Billions)$3.55 $3.87 $3.80
Operating Income ($CAD Billions)$1.203 $1.560 $1.317
Operating Ratio (%)66.1% 59.7% 65.3%
Core Adjusted OR (%)62.9% 57.1% 62.5%
Diluted EPS ($CAD)$0.90 $1.28 $0.97
Core Adjusted Diluted EPS ($CAD)$0.99 $1.29 $1.06

Actual vs SPGI Consensus (USD basis)

MetricQ1 2025 Consensus (USD)Q1 2025 Actual (USD)
EPS ($)$0.73*$0.74*
Revenue ($ Billions)$2.61*$2.64*

Values retrieved from S&P Global.
Notes: Consensus and actual shown on SPGI USD-converted basis [GetEstimates].

Commodity Revenue Mix (CAD, Q1 2025 vs Q1 2024)

Line of BusinessQ1 2024 ($MM)Q1 2025 ($MM)Change (%)
Grain$730 $788 +8%
Coal$209 $257 +23%
Potash$137 $156 +14%
Fertilizers & Sulphur$104 $114 +10%
Forest Products$202 $217 +7%
Energy, Chemicals & Plastics$702 $758 +8%
Metals, Minerals & Consumer$440 $448 +2%
Automotive$265 $315 +19%
Intermodal$638 $674 +6%
Total Freight$3,427 $3,727 +9%

KPIs (Operations & Safety)

KPIQ1 2024Q1 2025
RTMs (Millions)51,838 53,724
Carloads (Thousands)1,072.6 1,104.6
Average Train Speed (mph)19.1 19.1
Average Terminal Dwell (hours)9.7 10.3
FRA Injuries per 200k hrs1.14 0.98
FRA Accidents per MM train-miles0.90 0.38
Fuel Efficiency (gal/‘000 GTMs)1.065 1.064

Guidance Changes

MetricPeriodPrevious Guidance (1/29/2025)Current Guidance (4/30/2025)Change
Core Adjusted Diluted EPS GrowthFY 2025+12% to +18% vs $4.25 +10% to +14% vs $4.25 Lowered
RTM GrowthFY 2025Mid-single digit Mid-single digit (unchanged) Maintained
Core Adjusted Effective Tax RateFY 2025~24.5% ~24.5% (unchanged) Maintained
Other Components of Net Periodic Benefit RecoveryFY 2025 vs 2024+$76MM +$76MM (unchanged) Maintained
Capital ProgramsFY 2025~$2.9B (higher on USD/CAD FX) ~$2.9B (higher on USD/CAD FX) Maintained
Dividend per Share (Quarterly)Q2 2025$0.19 $0.228 (payable Jul 28) Raised
Share Repurchase (NCIB)FY 2025New 4% program announced Feb 27 ~3.5M shares repurchased in March Executing

Earnings Call Themes & Trends

TopicQ3 2024 (10/23)Q4 2024 (1/29)Q1 2025 (4/30)Trend
Tariffs/MacroGuidance reiterated; noted temporary headwinds 2025 plan: 12–18% EPS growth Guidance trimmed to 10–14%; FX −2 pts; pipeline still strong Cautious near term
Safety/Regulatory (FRA)Accident rate improved; operating initiatives Continued leadership on safety Record safety metrics; collaborative FRA process changes (air tests, cold wheel tech) Improving
Intermodal/Ports (Gemini, St. John, Lázaro)Growth resuming, St. John ramp Positioning for 2025 momentum Strong Gemini ramp; MMX service +42%; mixed Vancouver/Montreal Positive
Canada–Mexico Land BridgeN/AN/AIncremental wins in LPG/refined fuels/plastics, oats test train; governments engaged Emerging
AutosGrowth in Q3 2024 strong exit Choppiness from tariffs; plants back online; inventories low; new Schneider auto parts moves Resilient
Bulk (Grain/Potash/Coal)Grain/Potash/Coal strength Continued bulk momentum Record Q1 Grain, Potash +8% RTM, Coal +10% RTM Strong
Capital & ReturnsDebt actions; capex >$2B $2.9B 2025 capex; returns resuming 4% buyback underway; dividend +20%; capex $2.9B Accretive

Management Commentary

  • “These first-quarter results demonstrate the power and resiliency of our unrivalled North American network.” — Keith Creel .
  • “We stepped into this trade storm… to become market makers… land bridge to Mexico uniquely.” — Keith Creel .
  • “Record March GTMs… operating team delivered despite three weeks of extreme cold.” — Mark Redd .
  • “Domestic intermodal strong; MMX 180/181 +42%; Gemini ramp; Schneider auto parts launched.” — John Brooks .
  • “Expect sub-60 OR for the year; sequential OR improvement from Q1.” — Nadeem Velani .

Q&A Highlights

  • Guidance mechanics: FX moved CAD to ~$1.37–1.38 vs plan, trimming ~2 pts off EPS growth; volumes tracking mid-single digits .
  • OR outlook: management targets sub-60% full-year OR; expects sequential improvement from Q1’s 62.5% Core adjusted OR .
  • Autos/steel tariffs: temporary choppiness mitigated by new Canada–Mexico flows; plants largely resumed shipments .
  • Intermodal: MMX continued growth; Gemini accelerating; minimal “import cliff” impact at Canadian/Mexican ports .
  • Buybacks/dividend: ~20% of 4% NCIB completed early; plan to complete by year-end; quarterly dividend raised 20% .

Estimates Context

  • Q1 2025 was a modest beat vs consensus: EPS $0.74 vs $0.73*, revenue $2.64B vs $2.61B* (SPGI USD basis). Following results, guidance was reduced to account for tariffs and FX, suggesting street models should lower top-end EPS assumptions and incorporate FX sensitivity .
    Values retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term caution but resilient execution: strong bulk and auto performance and record safety offset tariff/FX headwinds; guidance prudent rather than demand-driven .
  • Operating leverage intact: expect sequential OR improvement and potential sub-60% FY OR if volumes and cost discipline persist .
  • Network optionality is a differentiator: Canada–Mexico land-bridge wins in LPG/refined fuels/plastics and new grain corridors can counter U.S.-focused tariff impacts .
  • Capital returns are back: dividend +20% and active buybacks provide support while capex remains targeted at growth/safety .
  • Q2 setup: anticipate Panama Canal Railway sale gain (~US$230MM pre-tax) and continuing Gemini/MMX momentum as catalysts .
  • Watch FX: CAD strength shaved ~2 pts from EPS growth outlook; FX remains a swing factor for reported metrics .
  • Estimate implications: trim upper-end 2025 EPS growth expectations and model mid-single-digit RTM growth with disciplined pricing and improving OR .