10-QPeriod: Q1 FY2025

CANADIAN PACIFIC KANSAS CITY LTD/CN Quarterly Report for Q1 Ended Mar 31, 2025

Filed May 1, 2025For Securities:CP

Summary

Canadian Pacific Kansas City Ltd. (CPKC) reported a solid first quarter for 2025, with total revenues increasing by 8% to $3,795 million, driven by higher freight revenue per revenue ton-mile and increased volumes. Diluted earnings per share (EPS) saw a significant rise of 17% to $0.97, demonstrating improved profitability. The company also achieved operational efficiencies, reflected in a 210 basis point improvement in its operating ratio to 65.3%. Financially, CPKC managed its debt effectively, repaying a substantial portion of its long-term debt while also issuing new unsecured notes to extend its maturity profile. The company also advanced its share repurchase program. Despite increased fuel costs and ongoing investments, the company's liquidity remains strong, supported by operating cash flow and credit facilities. Looking ahead, CPKC declared a quarterly dividend of $0.228 per share, a 20% increase from the previous quarter, signaling confidence in its financial outlook and commitment to returning value to shareholders.

Key Highlights

  • 1Total revenues increased 8% to $3,795 million in Q1 2025, driven by higher freight revenue per RTM and volumes.
  • 2Diluted EPS rose 17% to $0.97 in Q1 2025, indicating improved profitability.
  • 3Operating ratio improved by 210 basis points to 65.3%, showcasing operational efficiencies.
  • 4The company repaid US$642 million in long-term debt and issued US$1.2 billion in new unsecured notes, strengthening its debt maturity profile.
  • 5A new normal course issuer bid was announced to repurchase up to 37.3 million common shares.
  • 6The declared quarterly dividend increased by 20% to $0.228 per share, reflecting management's confidence.
  • 7Cash flow from operations increased, supporting overall liquidity.

Frequently Asked Questions

The primary driver of the revenue increase was higher freight revenue per revenue ton-mile (RTM) and increased volumes as measured by RTMs. Specifically, strong performance was noted in Coal, Grain, Intermodal, Potash, and Automotive segments.

CPKC repaid US$642 million of its 2.90% 10-year Notes at maturity and issued US$1.2 billion in new unsecured notes (US$600 million 4.80% 5-year notes and US$600 million 5.20% 10-year notes). Additionally, a US$500 million term credit facility was fully repaid. The company's revolving credit facility remained undrawn as of March 31, 2025.

These are non-GAAP (Generally Accepted Accounting Principles) measures used by management to provide a clearer view of the underlying operational trends by excluding certain significant items such as acquisition-related costs and KCS purchase accounting adjustments. They are intended to facilitate a multi-period assessment of long-term profitability and improve comparability with past performance.

The company is involved in several legal proceedings, most notably those related to the Lac-Mégantic rail accident. While an April 28, 2025 filing indicates applications for leave to appeal to the Supreme Court of Canada regarding this matter, previous court decisions have dismissed claims against the Company. The company also has a significant legal matter with Remington Development Corporation and is involved in a 2014 tax assessment in Mexico. Management believes current provisions are adequate, but an unexpected adverse resolution of one or more legal actions could materially affect financial results in a particular period.