Canadian Pacific Kansas City (CP) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenues rose 6% year-over-year to $3.5–$3.55 billion, with core adjusted combined diluted EPS at $0.99, up 8%, and diluted EPS at $0.90, up 7%.

• Overcame operational challenges, including a major derailment and a four-day strike, while maintaining strong safety improvements and network performance.

• Achieved milestones in sustainability, including the first high-horsepower hydrogen locomotive test and recognition for ESG leadership.

• Strategic corridor approvals, such as MNBR and Meridian Corridor, enhanced cross-border service and long-term growth prospects.

• Management reaffirmed confidence in strategic initiatives and expects continued momentum into 2025.

Financial highlights

• Total revenue reached $3.55 billion, up 6% year-over-year; operating income was $1.2 billion, up 3%.

• Net income attributable to controlling shareholders was $837 million, up 7% year-over-year.

• Operating ratio was 66.1% (reported), with core adjusted combined OR at 62.9%, both up 120 bps.

• Adjusted combined free cash flow for Q3 was $523 million.

• Leverage ratio at 3.1x, targeting 2.5x in early 2025.

Outlook and guidance

• Forecasting double-digit core adjusted combined diluted EPS growth for 2024 versus $3.84 in 2023.

• Expecting mid-single digit RTM growth and capital expenditures of $2.75 billion for 2024.

• Multiyear outlook targets high single-digit revenue growth, double-digit EPS growth, and annual CapEx of $2.6–$2.8 billion.

• Strong bulk and grain outlook for Q4 and into 2025, with favorable comps and regulated pricing.

• 2024 core adjusted effective tax rate expected at approximately 24.75%.