Canadian Pacific Kansas City (CP) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues reached $3.8 billion, up 8% year-over-year, with 6% volume growth and a 280 basis point improvement in operating ratio to 61.8%.

• Total revenues also reported at $3.6 billion, up 14% year-over-year, with core adjusted combined diluted EPS rising 27% to $1.05 and reported diluted EPS at $0.97, reflecting strong network synergies and operational performance.

• The company is leveraging merger synergies, with an expected exit run rate of $800 million in revenue synergies by year-end, driven by intermodal, automotive, bulk, and merchandise segments.

• Management remains optimistic for the second half of 2024, reaffirming full-year guidance and sustainable growth prospects despite macroeconomic and labor-related uncertainties.

Financial highlights

• Core adjusted combined operating ratio improved to 61.8%, a 280 basis point year-over-year improvement; reported operating ratio improved by 550 bps to 64.8%.

• Core adjusted combined EPS was $1.05, up 27% year-over-year; reported EPS was $0.97.

• Operating income rose 34% to $1.27 billion; net income attributable to controlling shareholders was $905 million, down 32% year-over-year.

• Cash provided by operating activities was $1.28 billion in Q2; adjusted combined free cash flow was $526 million.

Outlook and guidance

• Double-digit core adjusted combined earnings growth is expected for 2024, with high single-digit revenue growth targeted through 2028.

• Capital expenditures projected at $2.75 billion for 2024, with long-term annual capex guidance of $2.6–$2.8 billion.

• Guidance assumes a work stoppage due to labor negotiations, with no impact expected unless the stoppage exceeds two weeks.

• Q3 operating ratio may not improve sequentially due to casualty costs and stock-based compensation, but Q4 is expected to show record OR and strong earnings.