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CP

CANADIAN PACIFIC KANSAS CITY LTD/CN (CP)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue rose 3% to $3.874B with reported OR improving 210 bps to 59.7%; core adjusted diluted EPS was $1.29, up 9% YoY .
  • Segment strength: Grain (+12%), Automotive (+13%), ECP (+3%) offset intermodal (-6%); safety improved with FRA personal injuries -26% YoY and accidents -5% .
  • 2025 guidance: core adjusted diluted EPS growth of 12–18%, mid-single-digit RTM growth, ~$2.9B CapEx, core adjusted effective tax rate ~24.5% and other benefit recovery +$76M .
  • Execution catalysts: Laredo second-span completed; MMX/CSX corridor to expand intermodal; management targets sub-60% OR in 2025 and intends to reinstate buybacks .

What Went Well and What Went Wrong

  • What Went Well

    • “The team delivered revenues of $3.9 billion… operating ratio of 57.1% [core]… core EPS of $1.29, up 9% versus last year” .
    • Grain delivered a record Q4; Canadian grain +18% with improved crop and synergies to Mexico; Automotive +23% volumes, record quarter/year .
    • Safety leadership: FRA personal injury frequency fell to 0.84 and accident frequency to 1.03; industry-leading train accident frequency for second year .

  • What Went Wrong

    • Intermodal revenue -6% (domestic +4% but international -1%) impacted by Vancouver labor disruption and mix; potash -4% revenue on -7% volumes; coal -3% revenue on -8% volumes .
    • Elevated PS&O and materials tied to parts agreement; depreciation +6% YoY; Q4 purchase accounting and acquisition costs weighed on GAAP EPS .
    • Macro/tariff uncertainty persists; management baking risk into guidance though expects upper-end outcomes absent volatility .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($CAD Billions)$3.8 $3.549 $3.874
Diluted EPS ($CAD)$0.97 $0.90 $1.28
Core Adjusted Diluted EPS ($CAD)$1.05 $0.99 $1.29
Operating Ratio (%) - Reported64.8% 66.1% 59.7%
Operating Ratio (%) - Core Adjusted61.8% 62.9% 57.1%
YoY ComparisonQ4 2023Q4 2024
Revenue ($CAD Billions)$3.776 $3.874
Diluted EPS ($CAD)$1.10 $1.28
Core Adjusted Diluted EPS ($CAD)$1.18 $1.29
Operating Ratio (%) - Reported61.8% 59.7%
Operating Ratio (%) - Core Adjusted58.7% 57.1%

Segment freight revenue (Q4):

Segment ($CAD Millions)Q4 2023Q4 2024
Grain844 949
Coal256 250
Potash157 153
Fertilizers & Sulphur109 108
Forest Products207 213
Energy, Chemicals & Plastics717 742
Metals, Minerals & Consumer451 430
Automotive286 324
Intermodal670 632
Total Freight Revenues3,697 3,801

Operational KPIs:

KPIQ4 2023Q3 2024Q4 2024
Avg Train Speed (mph)18.6 18.8 18.7
Avg Terminal Dwell (hours)9.3 10.3 10.2
Fuel Efficiency (US gal/1,000 GTMs)1.042 1.016 1.025
Locomotive Productivity (GTMs/operating hp)164 167 165
FRA Personal Injuries per 200k hours1.13 0.85 0.84
FRA Train Accidents per MM Train-miles1.08 1.27 1.03

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Core Adjusted Diluted EPS Growth (%)FY 2025N/A (new)12–18% New
Volume Growth (RTMs)FY 2025N/A (new)Mid-single-digit New
Capital Expenditures ($CAD Billions)FY 2025N/A (new)~$2.9 New
Other Components of Net Periodic Benefit Recovery ($CAD Millions)FY 2025N/A (new)+$76 vs 2024 New
Core Adjusted Effective Tax Rate (%)FY 2025N/A (new)~24.5% New
Dividend per Share ($CAD)Q1 2025$0.19 (Q4 2024) $0.19 (declared Jan 29, 2025) Maintained
Operating Ratio (Management Expectation)FY 2025N/A (multi-year target)Sub-60% targeted Directional (raised ambition)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024 and Q3 2024)Current Period (Q4 2024)Trend
Labor stability & supply chainQ2: Anticipated Canadian work stoppage and built into guidance ; Q3: 4-day stoppage; rapid recovery Multiple CBAs negotiated; aiming for four years of labor stability pending ratifications Improving reliability
Laredo bridge capacityQ3: Second span opening by year-end Construction completed; opening ceremony imminent; capacity more than doubled Capacity expansion realized
MMX intermodal (Chicago–Mexico) & CSX linkQ2: MMX volumes +50% since end-2023; pipeline of opportunities Domestic intermodal growth; direct service with CSX to Southeast enhances reach Expanding routes/services
Automotive closed-loopQ2: Record quarter; Dallas Wylie auto compound opened ; Q3: Record quarter GM Supplier of the Year; continued record performance and new contracts Strong momentum
Safety leadershipQ3: Speed +6%, dwell -8%, safety metrics improved FRA personal injuries -26% YoY; industry-low train accident frequency Sustained leadership
Tariffs/macro policyQ3: Monitoring policy shifts; building resilient lanes Management expects pragmatic outcomes; guidance range bakes in risk Watchful; risk managed
Technology & sustainabilityQ3: First high horsepower hydrogen locomotive test completed Continued investments in safety/efficiency; locomotive upgrades and Tier 4 deliveries Ongoing execution
Mexico operations productivityQ3: Capacity projects and velocity improvements Mexico network speed +22% YoY; dwell -8%; productivity gains Improving markedly

Management Commentary

  • Keith Creel: “For the quarter, the team delivered revenues of $3.9 billion… operating ratio of 57.1% [core]… core EPS of $1.29, up 9% versus last year… we expect to deliver mid-single-digit volume growth and earnings growth of 12% to 18% [in 2025]” .
  • Mark Redd: “Train weight [and] length… improved by 4%… fuel efficiency improved by 2%… FRA personal injuries… 0.84, 26% YoY improvement… we are carrying positive momentum in 2025” .
  • John Brooks: “Grain revenues and RTMs were up 11%, a record Q4… Automotive revenue up 16% on a 23% volume growth… Domestic intermodal volumes up 4%… International intermodal down 1% primarily due to labor disruption at Vancouver” .
  • Nadeem Velani: “Core adjusted combined OR came in at 57.1%… core adjusted combined diluted EPS was $1.29… expect core adjusted effective tax rate ~24.5% in 2025… invest approximately $2.9 billion in CapEx in 2025… plan to reinstate our share buyback program” .

Q&A Highlights

  • RTM outlook: Roughly split between 2–3% synergies and 2–3% organic base growth; likely more weighted to back half; strong start to 2025 .
  • Tariffs risk: Management expects pragmatic policy; guidance range embeds risk; still sees higher-end outcomes absent extreme volatility .
  • Capital returns: Buyback embedded modestly in 2025 EPS growth range; balance with dividend adjustments and ~$2.9B CapEx .
  • Operating ratio: Management targets sub-60% OR again near term and 100 bps per year improvement longer-term (continuous improvement) .
  • Dallas Wylie terminal option: Any NS purchase would be an “island”; CPKC would redeploy capital, remain customer/partner; growth focus remains intact .
  • MMX rollout: Significant growth; +33% YoY excluding short-haul lapping; CSX link adds Southeast lanes; reefer ecosystem with Americold coming mid-2025 .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q4 2024 EPS and revenue; values were unavailable due to SPGI daily request limit. As a result, a formal comparison to Wall Street consensus could not be provided at this time. Estimates via S&P Global were unavailable.

Key Takeaways for Investors

  • Q4 delivered clean operational improvement: core OR 57.1% and core EPS $1.29, with stronger bulk and automotive offsetting intermodal softness tied to labor .
  • 2025 setup: EPS growth 12–18%, mid-single-digit RTM growth, with CapEx prioritized to unlock capacity and productivity (Laredo, Mexico/KS corridors) .
  • Structural growth drivers: MMX/CSX corridor, Americold-co-located reefer network, cross-border grain and ECP lanes, and automotive closed-loop model (GM recognition) .
  • Safety and efficiency are tangible levers: fuel efficiency, speed and dwell trends support margin trajectory; management highlights sub-60% OR goal in 2025 .
  • Capital returns likely resume: leverage near targets; management expects reinstating buybacks while balancing dividend and growth CapEx .
  • Policy/labor risk contained in guidance: Management embeds tariff volatility and expects pragmatic outcomes; recent labor agreements point to improved reliability .
  • Near-term trading: Positive on guidance clarity, OR progress and capacity unlock; watch intermodal normalization post Vancouver and ongoing macro/tariff headlines .