Canadian Pacific Kansas City’s (CP) second-quarter 2024 earnings (excluding 6 cents from non-recurring items) of 77 cents per share beat the Zacks Consensus Estimate of 74 cents. The bottom line improved 24.2% on a year-over-year basis. Results were aided by strong operational efficiency.Operating revenues of $2.63 billion marginally beat the Zacks Consensus Estimate of $2.60 billion. The top line improved by 11.4% on a year-over-year basis due to synergies and favorable operating and safety performance.Fre ...

Marvin Samuel Tolentino Pineda/iStock Editorial via Getty Images Introduction It's time to do one of my favorite things: discussing Canadian Pacific Kansas City Limited (NYSE:CP), a company I have been giving the Strong Buy tag since July 2023. My most recent article was written on April 25, when I called the company “One Of My Favorite 'Win-Win' Investments” in the title. Additionally, the stock has been featured in a number of multi-ticker articles since then, as I have been consistently adding to wha ...

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Financial Data and Key Metrics - Revenue for Q2 2024 was $3.8 billion, up 8% YoY, driven by strong volume growth of 6% [8] - Operating ratio improved by 280 basis points to 61.8% [8] - EPS increased by 27% to $1.05 [8] - Average terminal dwell declined by 9%, train speed improved by 6%, locomotive productivity increased by 10%, and fuel efficiency improved by 2% [9] - Train accidents decreased by 4%, and personal injuries improved by 38% [9] Business Line Performance - **Bulk**: Grain revenues increased by 17% with 15% RTM growth, driven by strong shipments of corn, soybeans, and wheat to Mexico [12] - **Potash**: Revenues grew by 24% with 11% volume growth, supported by strong export demand [13] - **Coal**: Revenue increased by 3% despite a 2% decline in volume, with export Canadian coal partially offsetting weaker US demand [14] - **Energy, Chemicals, and Plastics (ECP)**: Revenue grew by 10% with 14% volume growth, driven by higher crude shipments and synergies across the portfolio [14] - **Forest Products**: Revenue declined by 1% with a 1% volume drop, impacted by a soft macro environment [15] - **Metals, Minerals, and Consumer Products**: Revenue decreased by 3% with a 9% volume decline, primarily due to lower natural gas prices and labor disruptions [15] - **Automotive**: Record quarter with revenue up 28% and volume growth of 21%, driven by longer-haul volumes from Mexico [16] - **Intermodal**: Revenue declined by 7% with a 3% volume drop, though domestic intermodal volumes grew by 3% [17] Market Performance - **US Grain**: Volumes grew by 17% YoY, driven by strong shipments to Mexico [12] - **Canadian Grain**: Volumes increased by 13%, with expectations of a strong harvest season [12] - **Mexico**: Strong growth in automotive and grain shipments, with new opportunities emerging in cross-border services [16][17] Strategic Direction and Industry Competition - The company is focused on leveraging its expanded network to create unique opportunities and deliver differentiated outcomes [9][10] - Investments in capacity and infrastructure, such as the new Dallas auto compound, are expected to drive future growth [16][33] - The company is well-positioned to deliver strong value creation in 2024 and beyond, with a focus on operational efficiency and disciplined pricing [10][24] Management Commentary on Operating Environment and Future Outlook - The freight environment remains challenging, but the company is leaning into the challenge and creating owner opportunities enabled by its new network [10] - Management is optimistic about the second half of 2024, with strong momentum and a focus on delivering value creation [10][24] - The company expects to reach its target leverage ratio by early 2025, at which point it will evaluate shareholder returns [24] Other Important Information - The company is on track to deliver double-digit core adjusted combined earnings growth, driven by business performance without reliance on shareholder returns [24] - Synergies are ramping up, with expectations of reaching an $800 million run rate by the end of 2024 [27][28] Q&A Session Summary Question: Revenue Synergies and Exit Rate Expectations - Revenue synergies are progressing well, with an expected exit run rate of $800 million by the end of 2024, driven by growth in intermodal, bulk, and ECP franchises [27][28] Question: Dallas Auto Compound Capacity and Growth Potential - The Dallas auto compound has a capacity of 160,000-180,000 units annually, with three OEMs already signed on and potential for further expansion [31][33] Question: Labor Situation and Potential Strike Impact - The company is preparing for a potential labor strike, which could occur by the end of August, but does not expect it to impact guidance unless it lasts more than two weeks [39][44] Question: Capacity and Margin Expansion in 2025 - The company is not capacity-constrained and expects strong margin expansion in 2025, driven by operational efficiency and low incremental costs [51][52] Question: Inflation and Pricing Trends - Inflation is moderating, and the company is seeing strong pricing trends, with a widening spread between pricing and inflation expected to benefit margins [60][61] Question: Grain Crop Outlook - The company is optimistic about the Canadian grain crop, with early indications pointing to a harvest in line with or stronger than the five-year average [78] Question: Laredo Bridge Expansion and Growth Opportunities - The Laredo bridge expansion is expected to improve train speed and velocity, creating growth opportunities in cross-border services [70][71] Question: International Intermodal and Service Performance - Service performance in Mexico has improved, with new service calls at Lázaro and strong demand for cross-border services [73][74] Question: OR Improvement and Stock-Based Compensation - The company does not expect sequential OR improvement in Q3 due to higher stock-based compensation and casualty costs but anticipates a strong Q4 with a record operating ratio [77][66] Question: Labor Issues and Reputational Risk - The potential labor strike could damage Canada's reputation, but the company remains committed to negotiating a fair deal [108][109] Question: Pricing and Legacy Contracts - Most legacy contracts have been repriced, with only one major contract remaining, indicating limited further pricing upside [105]

Canadian Pacific Kansas City (CP) reported $2.63 billion in revenue for the quarter ended June 2024, representing a year-over-year increase of 11.4%. EPS of $0.77 for the same period compares to $0.62 a year ago.The reported revenue represents a surprise of +1.17% over the Zacks Consensus Estimate of $2.6 billion. With the consensus EPS estimate being $0.74, the EPS surprise was +4.05%.While investors scrutinize revenue and earnings changes year-over-year and how they compare with Wall Street expectations t ...

Financial Performance - In Q2 2024, the Company reported diluted EPS of $0.97, a decrease of 32% year-over-year, while core adjusted combined diluted EPS increased by 27% to $1.05[91]. - Total revenues for Q2 2024 increased by 14% to $3,603 million, driven by higher volumes, the KCS acquisition, and increased freight revenue per revenue ton-mile (RTM)[92]. - The Company achieved a core adjusted combined operating ratio of 61.8% in Q2 2024, improving by 280 basis points compared to the same period in 2023[100]. - The reported operating ratio for the second quarter of 2024 was 64.8%, compared to 70.3% in 2023[208]. - The core adjusted combined operating ratio for the first half of 2024 was 62.9%, an improvement from 64.0% in 2023[208]. - CPKC's diluted earnings per share for Q2 2024 was $0.97, down from $1.42 in Q2 2023, while for the first six months of 2024, it was $1.80 compared to $2.28 in the same period of 2023[202]. - Core adjusted combined diluted earnings per share for Q2 2024 increased to $1.05 from $0.83 in Q2 2023, and for the first six months of 2024, it rose to $1.98 from $1.73 in the same period of 2023[202]. Revenue and Freight Performance - Freight revenues in Q2 2024 rose by 14% to $3,534 million, with non-freight revenues slightly decreasing by 5% to $69 million[103][104]. - For the six months ended June 30, 2024, freight revenues increased to $1,395 million, a 33% increase from $1,052 million in 2023[114]. - Revenue ton-miles (RTMs) increased to 27,810 million, a 33% increase from 20,961 million in 2023[114]. - Coal freight revenues for the second quarter of 2024 reached $236 million, an 8% increase from $219 million in 2023[115]. - Potash freight revenues for the second quarter of 2024 were $180 million, a 25% increase from $144 million in 2023[119]. - Fertilizers and sulphur freight revenues for the second quarter of 2024 increased to $103 million, a 16% increase from $89 million in 2023[122]. - Forest products freight revenues for the second quarter of 2024 were $203 million, a 9% increase from $187 million in 2023[124]. - Energy, chemicals, and plastics freight revenues for the second quarter of 2024 reached $695 million, a 21% increase from $575 million in 2023[127]. - Automotive freight revenues for the second quarter of 2024 increased to $358 million, a 39% increase from $257 million in 2023[131]. - Intermodal freight revenues for the first six months of 2024 were $1,268 million, an 11% increase from $1,145 million in 2023[134]. Expenses and Costs - Total operating expenses for the second quarter of 2024 were $2,336 million, a 5% increase from $2,230 million in 2023[135]. - Fuel expenses for the second quarter of 2024 increased by $69 million, primarily due to higher fuel prices and the impact of the KCS acquisition[139]. - Compensation and benefits expenses for the first six months of 2024 rose to $1,302 million, a 19% increase from $1,097 million in 2023[136]. - The increase in Depreciation and amortization expense in the first six months of 2024 was primarily due to the KCS acquisition, amounting to $255 million[143]. - Purchased services and other expense increased by $235 million in the first six months of 2024, largely due to the KCS acquisition and cost inflation[144]. Cash Flow and Financial Position - As of June 30, 2024, the Company had $557 million in cash and cash equivalents, an increase from $464 million at December 31, 2023[167]. - During the first six months of 2024, cash provided by operating activities increased by $519 million compared to the same period in 2023, primarily due to higher cash generating income[174]. - Cash used in financing activities was $895 million in the first six months of 2024, an increase of $17 million compared to $878 million in the same period of 2023[177]. - The Company has total commercial paper borrowings outstanding of $536 million as of June 30, 2024, down from $800 million at December 31, 2023[169]. - The Company has contractual cash requirements of $3,684 million due within the next 12 months, including debt and finance leases[171]. - As of June 30, 2024, the Company's long-term debt stood at $18,772 million, a decrease from $19,169 million at December 31, 2023[187]. Tax and Interest - Income tax expense was $292 million in the second quarter of 2024, a change of $7,964 million from a recovery of $7,672 million in the same period of 2023[153]. - The effective tax rate for the second quarter of 2024 was 24.40%, compared to 120.88% in the same period of 2023[155]. - Net interest expense was $406 million in the first six months of 2024, an increase of $48 million, or 13%, from $358 million in the same period of 2023[151]. - The company is exposed to interest rate risk, with a hypothetical one percentage point decrease in interest rates increasing the fair value of fixed-rate debt by approximately $1.8 billion as of June 30, 2024[221]. - The company may enter into forward rate agreements and swap agreements to manage interest rate exposure[220]. Acquisition Impact - The KCS acquisition significantly impacted revenue growth across various segments, including Energy, chemicals, and plastics, contributing to higher volumes and freight rates[128]. - Acquisition-related costs in the first six months of 2024 amounted to $54 million, impacting diluted EPS by 4 cents, while in the first six months of 2023, these costs were $145 million, impacting diluted EPS by 13 cents[198][199]. - KCS purchase accounting for the first six months of 2024 was $170 million, unfavorably impacting diluted EPS by 13 cents, compared to $123 million in the same period of 2023, which impacted diluted EPS by 11 cents[200][201]. - CPKC's acquisition of KCS began consolidating on April 14, 2023, after previously accounting for it under the equity method since December 14, 2021[193]. - In the first half of 2024, acquisition-related costs for the KCS acquisition totaled $54 million, negatively impacting the operating ratio by 0.8%[204]. Other Financial Metrics - Other income was $40 million in the second quarter of 2024, a change of $61 million from an expense of $21 million in the same period of 2023[147]. - The unfavorable impact of fuel prices on Operating income was $67 million in the first six months of 2024, leading to a decrease in Total revenues of $70 million[164]. - The Company recognized $26 million and $230 million of equity earnings from KCS for the periods from April 1 to April 13, 2023, and January 1 to April 13, 2023, respectively[146]. - Deferred tax recoveries related to changes in the outside basis difference on the equity investment in KCS amounted to $7,855 million in the first six months of 2023, positively impacting diluted EPS by $8.42[199]. - Management believes that excluding significant items from GAAP results provides a clearer view of CPKC's financial performance for multi-period assessments[194].

Release: July 30, 2024 CPKC's strong second-quarter results demonstrate advantages of North American network; carrying momentum into second half of 2024 Calgary – Canadian Pacific Kansas City (TSX: CP) (NYSE: CP) (CPKC) today announced its second-quarter results, including revenues of $3.6 billion, diluted earnings per share (EPS) of $0.97 and core adjusted combined diluted EPS of $1.05. 1, 2 "Our excellent second quarter results showcase how the advantages of this unrivaled North American network are being ...

CALGARY, AB, July 30, 2024 /PRNewswire/ - Canadian Pacific Kansas City (TSX: CP) (NYSE: CP) (CPKC) today announced its second-quarter results, including revenues of $3.6 billion, diluted earnings per share (EPS) of $0.97 and core adjusted combined diluted EPS1, 2 of $1.05."Our excellent second quarter results showcase how the advantages of this unrivaled North American network are being realized," said Keith Creel, CPKC President and Chief Executive Officer. "These results are a direct reflection of the ded ...

CALGARY, AB, July 29, 2024 /PRNewswire/ - It is with great sadness that Canadian Pacific Kansas City (TSX: CP) (NYSE: CP) (CPKC) mourns the passing of former Kansas City Southern (KCS) President and CEO Patrick J. Ottensmeyer."Pat's vision and leadership played a monumental role in the great history of Kansas City Southern as he helped reshape the railway industry," said Keith Creel, CPKC President and CEO. "We have lost a remarkable leader and a cherished friend. Pat's legacy lives on and can be seen in th ...

Wall Street analysts expect Canadian Pacific Kansas City (CP) to post quarterly earnings of $0.74 per share in its upcoming report, which indicates a year-over-year increase of 19.4%. Revenues are expected to be $2.6 billion, up 10.2% from the year-ago quarter.Over the last 30 days, there has been an upward revision of 0.8% in the consensus EPS estimate for the quarter, leading to its current level. This signifies the covering analysts' collective reconsideration of their initial forecasts over the course o ...