Q2 2025 Earnings Summary
- Unique Three-Nation Network Advantage: Management repeatedly emphasized that CP’s network—spanning the U.S., Canada, and Mexico—creates unique opportunities for differentiated partnerships and revenue streams. This strategic positioning, especially amid merger and consolidation discussions, reinforces its long‐term competitive edge.
- Robust Growth in Intermodal and Bulk Segments: The call’s discussion highlighted strong volume gains—such as a 40% year‐over‐year increase in certain intermodal services—and rapid momentum in the Gemini partnership, pointing to significant upside potential across key markets.
- Improving Operational Efficiency: Executives expect sequential operating ratio improvements into Q3 and Q4, with guidance suggesting a sub‑60% operating ratio for the year. This anticipated margin expansion, supported by disciplined cost management and operational recovery efforts, underpins a positive earnings outlook.
| Metric | YoY Change | Reason |
|---|---|---|
Gross Ton-Miles (GTMs) | +3% | Higher volumes from Coal, Grain, Intermodal, Potash, and Automotive increased GTMs from 95,809 million in Q1 2024 to 98,412 million in Q1 2025, indicating an expanded workload in the current period. |
Train Miles | −2% | An increase of 5% in average train weights allowed CP to reduce train miles from 11,995 thousand in Q1 2024 to 11,804 thousand in Q1 2025, reflecting improved asset utilization and operational efficiency. |
Fuel Efficiency | Flat (1.065 vs. 1.064 gallons per 1,000 GTMs) | Fuel efficiency remained essentially unchanged due to consistent operational practices despite volume growth, maintaining nearly identical fuel consumption rates. |
Total Employees | −1% | A slight reduction from 19,997 in Q1 2024 to 19,749 in Q1 2025 resulted from efficient resource planning aimed at workforce optimization in line with strategic requirements. |
Total Revenues | +8% (from $3,520 million in Q1 2024 to $3,795 million in Q1 2025 ) | Revenues grew due to improved freight revenue per revenue ton-mile—up 5% from 6.61 cents to 6.94 cents—and increased volumes across key commodities, bolstered by favorable FX impacts and higher freight rates. |
Freight Revenue per RTM | +5% (from 6.61 cents in Q1 2024 to 6.94 cents in Q1 2025 ) | Favorable FX impacts and higher freight rates drove an increase in freight revenue per RTM, though this was partially offset by lower fuel surcharge revenue. |
Operating Expenses | +5% (from $2,371 million in Q1 2024 to $2,478 million in Q1 2025 ) | The modest rise in expenses was mainly due to a 5% increase in fuel costs, a notable 32% jump in locomotive materials expenses due to a new parts agreement, along with higher equipment rents and increased depreciation costs. |
Net Income | +17% (from $775 million in Q1 2024 to $910 million in Q1 2025 ) | Improved revenue performance and controlled expense growth contributed to a significant 17% increase in net income, indicating enhanced profitability in the current quarter compared to the previous period. |
Diluted EPS | +17% (from $0.83 in Q1 2024 to $0.97 in Q1 2025 ) | The rise in profitability and efficient cost management resulted in a 17% improvement in diluted EPS, delivering better returns for shareholders relative to the prior period. |
Operating Ratio | Improved by 210 basis points (from 67.4% in Q1 2024 to 65.3% in Q1 2025 ) | Enhanced cost management coupled with revenue growth led to an improved operating ratio, dropping by 210 basis points, which reflects better operational efficiency and cost control in Q1 2025 compared to Q1 2024. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Volume Growth | FY 2025 | mid-single-digit volume growth for the year | mid-single-digit volume growth for the year | no change |
Earnings Growth | FY 2025 | no prior guidance | double-digit earnings growth for the year | no prior guidance |
Operating Ratio (OR) | FY 2025 | sequential improvement from Q1 OR of 62.5% with a goal to achieve a sub-60 OR for the year | expects a sub-sixty OR for the year | no change |
Effective Tax Rate | FY 2025 | approximately 24.5% for 2025 | approximately 24.5% for 2025 | no change |
-
Merger Strategy
Q: How will CP handle merger dynamics?
A: Management emphasized that CP will use its unique, cross‐national network and strong partnerships to navigate merger challenges, seek meaningful concessions, and enhance competition throughout the regulatory process. -
Volume Outlook
Q: Is mid-single digit volume growth sustainable?
A: The team expressed confidence in maintaining mid single-digit volume growth, leveraging integrated operations and new service solutions like Gemini, even amid ongoing macro uncertainties. -
Integration Impact
Q: What integration effects affected Q2 results?
A: Management noted that systems integration led to a $3–$4 EPS impact due to higher expenses and slight operational setbacks, though these issues are largely contained in Q2 with sequential improvements expected in Q3. -
Pricing Headwinds
Q: How did tariffs, fuel, and taxes affect pricing?
A: Leaders explained that lower fuel prices and the removal of Canada’s carbon tax wiped out the pricing benefits, with mix challenges offset by growth in intermodal services, and expect fuel improvements to gradually ease these headwinds. -
Gemini & MMX Performance
Q: How are Gemini and MMX performing?
A: Management highlighted that Gemini is ramping faster than expected—especially in Vancouver—and MMX volumes surged 40% year-over-year, reflecting a strong sales effort and solid growth potential. -
Regulatory & Customer Sentiment
Q: How are regulators and customers responding?
A: Early discussions indicate that both regulators and customers remain cautiously positive, seeking detailed assurances on integration and public interest considerations while acknowledging CP’s strong service proposition. -
Consolidation Options
Q: Will CP pursue further consolidation moves?
A: The team confirmed that while CP will consider various scenarios to maximize shareholder value, it is not compelled to join additional consolidations such as with CPCN, instead preferring flexible, competitive partnerships.