CPKC earnings grow despite Canadian work stoppage – Trains

CALGARY, Alberta — Canadian Pacific Kansas City’s third-quarter profits and revenue increased despite the impact of the four-day work stoppage in Canada, the railway reported on Wednesday.

Quarterly operating income rose 3%, to $870 million, as revenue increased 6%, to $2.56 billion. Earnings per share increased 7%, to 65 cents. CPKC’s operating ratio increased 1.2 points, to 66.1%, as expenses rose 8% in the quarter, partly due to merger-related costs.

Third-quarter volume was up 4% when measured by revenue ton miles, CPKC’s preferred metric. But traffic was down 3% on the basis of carloads and containers, largely due to the shift of short-haul cross-border intermodal traffic to rival Ferromex. The four-day work stoppage in Canada in August dented volumes by 3%.

Revenue ton-miles grew across all three of CPKC’s business segments. Bulk was up 7% due to higher grain and potash volume. Merchandise RTMs were up 3% thanks to record automotive volume and growth in the energy, chemicals, and plastics category. Intermodal notched a 2% gain despite a 7% decline in domestic container traffic. CPKC won a new Ocean Network Express international contract that began in June, while the Midwest Mexico Express service linking Chicago and points in Mexico continued to grow and is up 27% for the year to date.

“We remain on track to deliver full-year guidance,” CEO Keith Creel told analysts and investors on the railway’s earnings call on Wednesday. CPKC continues to expect double-digit earnings growth for the full year, and now expects revenue ton miles to be up around 5% for 2024.

The railway’s key operational metrics improved during the quarter. Average train speed was up 6% compared to a year ago, terminal dwell was down 8%, and fuel efficiency improved 2%. Train length and weight also were up.

“These results are particularly impressive given the challenges we faced in the quarter,” Chief Operating Officer Mark Redd says.

The challenges included shutting down and then starting back up the CPKC network in Canada during the work stoppage, as well as a July derailment in North Dakota that temporarily closed the railway’s main artery linking the Midwest with Western Canada. The fiery, 29-car wreck involved the release of hazardous materials, including methanol and anhydrous ammonia.

CPKC’s safety statistics improved for the quarter, with the personal injury rate down 17% and the train accident rate down by 8%.

During the quarter CPKC put six new sidings into service on its key north-south corridor in the U.S., Redd says. Two more will be completed by the end of the year, along with additional capacity improvements in the Kansas City area.

In Mexico, where CPKC has experienced congestion issues, the railway completed new passing sidings and a crossover and track alignment project in Escadedo Yard near Monterrey. Similar investments in sidings and yard improvements – designed to keep local and yard jobs out of the way of through freights – will be completed elsewhere in Mexico by the end of the year, Redd says.

In addition, the second span CPKC is building across the Rio Grande at the Laredo, Texas, gateway remains on schedule for opening by the end of the year.

CPKC has made upgrades to 175 legacy Kansas City Southern locomotives that allow them to lead trains in Canada.