CPKC posts record $3bn quarter as grain and intermodal surge

CPKC booked record quarterly revenue of $3 billion U.S. in the third quarter, up 15% year over year, with operating income climbing 11% to $1.06 billion. Grain carloads led the charge at 20% growth, and the Calgary-based railway set volume records in both domestic and international intermodal.

"Against a pretty dynamic backdrop, I'm pleased with what the team has delivered," Chief Executive Keith Creel said on an earnings call after markets closed Wednesday. "We handled 6% more volume while continuing to improve the performance of the railroad, and more importantly, there is so much more opportunity in front of us."

Earnings per share rose a more modest 3%, to 74 cents. The culprit was cost: expenses jumped 18%, largely on fuel, pushing the operating ratio up 1.3 points to 64.8%. For a railroad, that's the efficiency gauge moving the wrong way even as the topline sings.

Where the volume came from

Measured in carloads and containers, volume rose 5%; on CPKC's preferred metric, revenue ton-miles, it was up 6%. The mix tells the story:

• Grain carloads: up 20%, a quarterly record
• Intermodal: up 9%, with records in both domestic and international
• Metals, minerals and consumer products: up 8%
• Potash and coal: each down 8%

The potash dip came from maintenance at port loading facilities; coal suffered from mine production issues. Strip out coal, and CPKC's third-quarter RTMs are up 17% since the 2023 Canadian Pacific–Kansas City Southern merger.

"That performance, despite a tough macro backdrop, is driven by disciplined commercial execution, self-help initiatives, and strategic share gains," Chief Marketing Officer John Brooks said. "And our strong service product network fluidity and available capacity provide the foundation for this growth."

On RTMs, international intermodal gained 11% and domestic 7%, Brooks said. The Southeast-Mexico SMX interline service with CSX grew 30% versus the second quarter alone.

The land bridge bet pays off

The Canada-Mexico land bridge business — the traffic CPKC chased as U.S. tariffs rerouted North American supply chains — is on pace to hit $427 million this year. At the time of the merger, that business was worth $71 million. That's a sixfold increase in roughly two years.

"This is not growth we inherited," Creel said. "It's growth that we created, taking a challenge and turning that challenge into an opportunity, creating new markets enabled by this unique North American network."

A coal win back from CN

CPKC also announced a new five-year contract with Elk Valley Resources, which runs four metallurgical coal mines in southern British Columbia. CPKC originates all of that coal but currently hands it to rival Canadian National at Kamloops, B.C., for forwarding to Vancouver for export. Under the new deal, CPKC reclaims 50% of the Vancouver-bound volume — about 1.5 trains per day, per Creel.

What does this change for shippers? More single-line capacity and competitive tension on Western Canadian coal lanes, and further evidence that CPKC intends to squeeze asset productivity out of every segment of its merged network.

Trains run faster; injuries run higher

Operationally, the quarter improved across the board: average train speed up 8%, terminal dwell down 7%, car-miles per day up 10%, fuel efficiency up 3%.

New locomotives helped — 170 ET44ACs from Wabtec, plus SD70ACe-T4s beginning to arrive from Progress Rail. "The newer locomotives have contributed to more than 35% reduction in our service interruptions on our 100-series trains in Canada, a 10% reduction in interruptions in our Western Canadian grain fleet, while improving fuel efficiency on both services," Chief Operating Officer Mark Redd said. The 100-series trains are CPKC's highest-priority intermodal services.

Safety was split. The train accident rate improved 60%, but the personal injury rate rose 20% year over year. "The increase of the personal injuries does not meet our standard," Redd said. Brief, and correct.

Heading into the fourth quarter, CPKC's combination of record intermodal demand, a fast-growing Mexico franchise and recovered coal share suggests the revenue records may not be done — the operating ratio is the number to watch.