CPKC(CP) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Earnings Release Q2 2025 Highlights and Management Commentary CPKC reports strong Q2 2025 results with revenue of $3.7 billion and diluted EPS of $1.33, expressing confidence in full-year guidance Q2 2025 Key Financial and Operating Metrics vs. Q2 2024 | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Revenues | $3.7 billion | $3.6 billion | +3% | | Reported Diluted EPS | $1.33 | $0.97 | +37% | | Core Adjusted Diluted EPS | $1.12 | $1.05 | +7% | | Reported Operating Ratio (OR) | 63.7% | 64.8% | -110 bps | | Core Adjusted OR | 60.7% | 61.8% | -110 bps | | Revenue Ton-Miles (RTMs) | N/A | N/A | +7% | - CEO Keith Creel stated the team delivered strong results by realizing value from the North American network and overcoming integration challenges[1] - The company remains confident in its ability to deliver on full-year guidance and achieve sustainable growth by leveraging its unique three-nation network[3] Forward-Looking Information and Company Overview The release outlines forward-looking statements and key risks including competition, regulations, and integration challenges - Forward-looking statements relate to the company's ability to deliver on 2025 financial guidance and realize benefits from the CP-KCS combination[8] - Key risks include economic conditions, competition, regulatory changes, and CP-KCS integration challenges[10][11] - CPKC operates a 20,000-route-mile transnational railway linking Canada, the U.S., and Mexico, providing access to major continental ports[13] Financial Statements Financials show revenue growth and higher net income from an asset sale, but a comprehensive loss due to currency effects Interim Consolidated Statements of Income Q2 2025 income rose significantly due to a $333 million asset sale gain, boosting net income by 36% and diluted EPS to $1.33 Q2 2025 Income Statement Highlights (vs. Q2 2024) | Metric (in millions CAD) | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenues | $3,699 | $3,603 | +2.7% | | Total Operating Expenses | $2,356 | $2,336 | +0.9% | | Operating Income | $1,343 | $1,267 | +6.0% | | Gain on sale of equity investment | $333 | $0 | N/A | | Net Income Attributable to Controlling Shareholders | $1,234 | $905 | +36.4% | | Diluted EPS | $1.33 | $0.97 | +37.1% | Interim Consolidated Statements of Comprehensive Income The company recorded a comprehensive loss of $468 million in Q2 2025, driven by a $1.73 billion negative foreign currency translation Q2 2025 Comprehensive Income (vs. Q2 2024) | Metric (in millions CAD) | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income | $1,234 | $903 | | Other Comprehensive (Loss) Income | ($1,756) | $313 | | Comprehensive (Loss) Income Attributable to Controlling Shareholders | ($468) | $1,207 | Interim Consolidated Balance Sheets Total assets decreased to $85.18 billion as of June 30, 2025, primarily due to reductions in Goodwill and Properties Balance Sheet Summary | Metric (in millions CAD) | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Total Current Assets | $3,525 | $3,384 | | Total Assets | $85,180 | $87,744 | | Total Current Liabilities | $3,778 | $5,661 | | Total Liabilities | $38,033 | $38,854 | | Total Equity | $47,147 | $48,890 | Interim Consolidated Statements of Cash Flows In H1 2025, the company generated $2.51 billion in operating cash flow and used $1.74 billion for share repurchases Six Months Ended June 30 Cash Flow Summary (in millions CAD) | Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,511 | $2,293 | | Net cash used in investing activities | ($1,021) | ($1,324) | | Net cash used in financing activities | ($1,385) | ($895) | | Net increase in cash and cash equivalents | $60 | $93 | | Cash and cash equivalents at end of period | $799 | $557 | Notes to Interim Consolidated Financial Statements Notes detail a $333 million asset sale gain, significant debt activities, a share buyback program, and positive legal updates Note 3: Revenues Q2 2025 freight revenue growth was driven by strong performance in the Grain, Intermodal, and Coal commodity segments Q2 Freight Revenues by Commodity (in millions CAD) | Commodity | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Grain | $743 | $665 | +11.7% | | Energy, chemicals and plastics | $712 | $695 | +2.4% | | Intermodal | $684 | $630 | +8.6% | | Metals, minerals and consumer products | $444 | $464 | -4.3% | | Automotive | $330 | $358 | -7.8% | | Coal | $256 | $236 | +8.5% | | Total Freight Revenues | $3,629 | $3,534 | +2.7% | Note 4: Gain on sale of equity investment The sale of its 50% stake in the Panama Canal Railway Company generated a pre-tax gain of $333 million (CAD) in Q2 2025 - The company sold its 50% stake in the Panama Canal Railway Company, recognizing a pre-tax gain of U.S. $232 million ($333 million CAD)[27] Note 9: Debt In H1 2025, the company issued $1.4 billion CAD and U.S. $1.2 billion in new notes while repaying U.S. $642 million of matured debt - In Q2 2025, the company issued $1.4 billion in CAD-denominated unsecured notes with various maturities[40] - In H1 2025, the company also issued U.S. $1.2 billion in USD-denominated unsecured notes[41] - During H1 2025, the company repaid the remaining U.S. $642 million on its 2.90% 10-year Notes[39] Note 11: Share repurchases The company repurchased nearly 13 million shares for approximately $1.4 billion in Q2 2025 under its current NCIB program Share Repurchase Activity (2025) | Period | Shares Repurchased | Amount (in millions CAD) | | :--- | :--- | :--- | | Q2 2025 | 12,882,454 | $1,398 | | H1 2025 | 16,363,112 | $1,773 | - The company announced an NCIB on February 27, 2025, to purchase up to 37.3 million Common Shares for cancellation by March 2, 2026[53] Note 14: Contingencies The company reports favorable court decisions in the Lac-Mégantic and Remington cases and continues to litigate a Mexican tax assessment - Lac-Mégantic Litigation: A Québec Court of Appeal upheld a trial decision dismissing all claims against the Company, though plaintiffs are seeking leave to appeal[67] - Remington Development Claim: An appeals court set aside a trial judgment of approximately $165 million and ordered a new trial[71] - 2014 Mexican Tax Assessment: A court vacated a prior adverse ruling on a Ps.6,372 million ($451 million) assessment, and the company is pursuing further appeals[72][75] Summary of Rail Data Q2 2025 data shows revenue growth from a 7% RTM increase, but operational challenges are noted in terminal dwell and accident frequency Commodity and Revenue Metrics Q2 2025 volume growth was led by Intermodal and Grain, but total freight revenue per RTM declined by 4% due to lower rates Q2 2025 vs Q2 2024 Volume Metrics by Commodity | Commodity | RTMs Change | Carloads Change | | :--- | :--- | :--- | | Intermodal | +18% | +14% | | Grain | +13% | +11% | | Automotive | +8% | -6% | | Coal | +5% | +9% | | Energy, chemicals and plastics | -5% | 0% | | Total | +7% | +6% | Q2 2025 vs Q2 2024 Revenue per RTM (cents) | Commodity | Q2 2025 | Q2 2024 | % Change | | :--- | :--- | :--- | :--- | | Automotive | 23.31 | 27.41 | -15% | | Intermodal | 6.67 | 7.28 | -8% | | Energy, chemicals and plastics | 7.78 | 7.21 | +8% | | Total Freight | 6.54 | 6.78 | -4% | Operations Performance Q2 2025 operational metrics show higher GTMs and train weight, but also increased terminal dwell time and a higher train accident rate Q2 2025 vs Q2 2024 Operations Performance | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Gross ton-miles (millions) | 101,973 | 96,579 | +6% | | Average train weight (tons) | 9,187 | 9,090 | +1% | | Average terminal dwell (hours) | 10.2 | 9.5 | +7% | | Average train speed (mph) | 19.3 | 19.3 | 0% | | FRA personal injury frequency | 0.77 | 0.84 | -8% | | FRA train accident frequency | 0.97 | 0.70 | +39% | Non-GAAP Measures Management uses non-GAAP measures like Core adjusted EPS and OR to evaluate underlying performance by excluding significant items - The company uses non-GAAP measures to evaluate underlying earnings by excluding significant items not indicative of future trends[88][92] - Key adjustments include excluding acquisition costs, a $333 million asset sale gain, and KCS purchase accounting impacts[92][93][94] Reconciliation of GAAP to Non-GAAP Measures Reconciliations show Q2 2025 Core adjusted EPS of $1.12 and a Core adjusted operating ratio of 60.7%, a 110 bps improvement Q2 2025 GAAP vs. Non-GAAP Reconciliation | Metric | GAAP | Core Adjusted | | :--- | :--- | :--- | | Diluted EPS | $1.33 | $1.12 | | Operating Ratio | 63.7% | 60.7% | Reconciliation of Net Income to Core Adjusted Income (Q2 2025, in millions CAD) | Description | Amount | | :--- | :--- | | Net income attributable to controlling shareholders | $1,234 | | Less: Gain on sale of equity investment (pre-tax) | $333 | | Less: Acquisition-related costs (pre-tax) | ($19) | | Less: KCS purchase accounting | ($95) | | Add: Tax effect of adjustments | $21 | | Core adjusted income | $1,036 | Adjusted Net Debt to Adjusted EBITDA Ratio | Metric | As of June 30, 2025 | | :--- | :--- | | Adjusted Net Debt (millions CAD) | $22,485 | | Adjusted EBITDA (LTM, millions CAD) | $7,586 | | Ratio | 3.0x |