Canadian Pacific Kansas City (CP) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues reached $3.8 billion, up 8% year-over-year, or $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.

• Operating ratio improved by 280 bps to 61.8% (core adjusted combined), and by 550 bps to 64.8% (reported), with continued realization of merger synergies and efficiency gains.

• Volume growth measured in Revenue Ton-Miles increased 6% year-over-year, with safety metrics improving and strong momentum into the second half of 2024.

Financial highlights

• Core adjusted combined operating income rose 17% year-over-year to $1.27 billion; net income attributable to controlling shareholders was $905 million, down 32% year-over-year.

• Cash from operations was $1.28 billion; adjusted combined free cash flow was $526 million; capital expenditures totaled $808 million in Q2, with a full-year target of $2.75 billion.

• Leverage ratio stands at 3.2x, with a target to reach optimal leverage by early 2025.

Outlook and guidance

• Double-digit core adjusted combined EPS growth is expected for 2024, with high single-digit revenue growth targeted through 2028 and annual capex of $2.6–$2.8 billion.

• Guidance assumes a potential work stoppage in Canada, but unless it exceeds two weeks, it is not expected to impact full-year outlook.

• Management reaffirmed confidence in delivering full-year guidance, citing strong operational foundation and sustainable growth prospects.