- Revenue Growth Revenues increased by 3% to $3.7 billion, driven by a 7% rise in carloads (RTMs), with freight revenue up 3%.
- Operating Ratio Improvement Operating ratio improved 110 basis points to 60.7%, reflecting enhanced operational efficiency and cost management.
- Net Earnings Growth Diluted earnings per share rose 7% to $1.12, supported by strong volume growth and pricing strength.
- Fuel Expense Reduction Fuel expenses decreased 12% to $405 million, benefiting from lower fuel prices and improved fuel efficiency.
- Shareholder Returns The company repurchased 16.4 million shares and generated $605 million in adjusted free cash flow, demonstrating strong shareholder value creation.
Operational Highlights
The company achieved volume growth of 7% and highlights include the ramp-up of the Gemini partnership, 180/181 premium domestic intermodal service growth of 40%, and increased traffic flows between Canada and Mexico. System-wide dwell increased by 7% in the quarter, while FRA personal injuries improved by 8% year-over-year, and train accidents decreased. The company received the first 40 of the Tier 4 locomotives, supporting growth and improving reliability and fuel efficiency.
Revenue Performance
Revenue performance was driven by freight revenue growth of 3% on a 7% increase in RTMs, with pricing results remaining strong. Segment highlights include: bulk revenue up 11% on 13% volume growth in grain, and coal revenue up 8% on 5% volume growth. Intermodal revenue was up 8% on 18% volume growth, with international intermodal volumes up 28% and domestic intermodal volumes up 8%.
Financial Highlights
The company's reported operating ratio was 63.7%, and a core adjusted operating ratio of 60.7%, a 110 basis point improvement over the previous year. Diluted earnings per share was $1.33, and core adjusted diluted earnings per share was $1.12, up 7% versus the previous year. As CFO Nadeem Velani stated, the company generated $1.36 billion in cash provided by operating activities, up 6% year-over-year.
Valuation and Outlook
With a P/E Ratio of 25.03 and a P/S Ratio of 6.4, the company's valuation multiples suggest that some of its strong performance may be priced in. However, with a dividend yield of 0.77% and a free cash flow yield of 2.48%, CPKC still offers a relatively attractive income opportunity. Analysts estimate next year's revenue growth at 6.6%, and the actual EPS came out at $1.13, relative to estimates at $1.15.