10-QPeriod: Q2 FY2026

CANADIAN PACIFIC KANSAS CITY LTD/CN Quarterly Report for Q2 Ended Jun 30, 2026

Filed July 30, 2026For Securities:CP

Summary

Canadian Pacific Kansas City Ltd. (CPKC) reported total revenues of $4.16 billion for the second quarter of 2026, a 13% increase year-over-year, driven by higher freight revenues across various segments, including a significant 24% rise in Grain revenue. Despite the revenue growth, diluted earnings per share (EPS) decreased to $1.15 from $1.33 in the prior year period. However, the company's core adjusted diluted EPS showed an increase to $1.27 from $1.12, indicating underlying operational improvements when excluding certain non-recurring items and purchase accounting adjustments. The operating ratio saw a slight increase to 64.6% from 63.7%, with the core adjusted operating ratio also widening slightly, suggesting pressure on cost management despite revenue gains. Financially, CPKC ended the quarter with $366 million in cash and cash equivalents, an increase from the prior year, and maintained access to significant credit facilities. The company repaid a substantial amount of long-term debt while also issuing new notes, reflecting active debt management. Significant litigation and tax matters continue to be disclosed, though management believes their resolution will not materially impact the company's financial position. Overall, CPKC demonstrates solid revenue growth supported by strong demand in key freight segments, but investors should monitor the impact of rising operating expenses and the reconciliation between GAAP and non-GAAP earnings per share.

Key Highlights

  • 1Total revenues increased by 13% to $4.16 billion in Q2 2026, driven primarily by a 13% increase in freight revenues.
  • 2Diluted EPS decreased to $1.15 from $1.33 in Q2 2025, however, core adjusted diluted EPS increased by 13% to $1.27, suggesting improved operational profitability excluding certain items.
  • 3The operating ratio slightly worsened to 64.6% from 63.7% in Q2 2025, while the core adjusted operating ratio also increased, indicating increased operating expenses relative to revenue growth.
  • 4Grain revenue saw a significant increase of 24% year-over-year, reflecting strong demand and volumes.
  • 5Fuel expense increased by 53% due to higher fuel prices and increased workload, significantly impacting operating expenses.
  • 6The company repaid $250 million in long-term debt and issued new notes totaling $1.2 billion during the first six months of 2026, showing active debt management.
  • 7Cash and cash equivalents increased to $366 million as of June 30, 2026, from $184 million at December 31, 2025.

Frequently Asked Questions

Total revenues increased by 13% to $4.16 billion, primarily driven by a 13% increase in freight revenues. This was supported by higher freight revenue per RTM (revenue ton-mile) and increased volumes across several segments, notably a significant 24% rise in Grain revenue. Non-freight revenues also saw an increase.

Diluted EPS decreased to $1.15 in Q2 2026 from $1.33 in Q2 2025. This decline is attributed to several factors including increased operating expenses, particularly higher fuel costs (up 53%) due to increased prices and workload, higher compensation and benefits costs, and increased depreciation. However, the company's core adjusted diluted EPS, which excludes certain non-recurring items and purchase accounting adjustments, increased to $1.27 from $1.12, suggesting that the underlying operational performance, when adjusted, improved.

As of June 30, 2026, CPKC reported $366 million in cash and cash equivalents, a substantial increase from $184 million at the end of 2025. The company also has access to a revolving credit facility and a commercial paper program, which was recently expanded. During the first six months of 2026, the company repaid significant long-term debt while also issuing new notes, indicating robust debt management and liquidity.

The company continues to be involved in various legal proceedings, most notably those related to the Lac-Mégantic rail accident and a 2014 tax assessment in Mexico. While management states that the resolution of these matters is not expected to have a material adverse effect on the company's business, financial position, results of operations, or liquidity, an unexpected adverse resolution of any one of these could potentially have a material impact. Investors should follow these developments closely.