CPKC (CP) Q3 2026 earnings review
CPKC freight volume accelerates, while fuel costs hurt operating margins
CPKC, the railway linking Canada, the United States and Mexico, grew freight shipments and underlying profit faster even as costly diesel hurt margins and tax audits held back reported earnings. Revenue rose 15% from a year ago and profit per share excluding one-offs climbed 16%, while a $94 million Canadian tax reassessment kept reported net income flat. Chief executive Keith Creel said the railway remains on track to meet its full-year commitments.
| Revenue | $4,219M +15% from a year ago (+13% excluding currency) |
|---|---|
| Profit per share, excluding one-offs | $1.28 +16% from a year ago |
| Freight volume (revenue ton-miles) | +6% up from +4% last quarter |
| Full-year outlook | Unchanged low double-digit profit per share growth |
⚖️ Verdict: 🟢 Bullish
The story got better because freight volume accelerated to 6% growth as grain and container traffic overcame the coal mining drag. That rebound, alongside 16% growth in profit per share excluding one-offs, brings the railway closer to its full-year targets after a slow first half. One caution: expensive fuel pushed the operating ratio 1.2 percentage points worse, and borrowing funded part of the quarter's share buybacks.
The question now is whether CPKC can deliver the big fourth quarter its full-year plan still requires. By our math, hitting the middle of the plan needs 16% growth in profit per share excluding one-offs against last year's record margin, and 8% volume growth. Fourth-quarter volume and fuel prices will settle it.
🐂 Bull Case
Grain and Container Shipments Lifted Volume Growth
CPKC runs the only single-line railway linking Canada, the United States and Mexico. President and chief executive Keith Creel said the railway continues to "deliver growth across key markets, including grain, intermodal and merchandise". Freight volume in revenue ton-miles (RTMs), the weight of cargo multiplied by the distance it travels, grew 6.1% from a year ago, up from 1.9% in the first quarter and 3.7% in the second.
- Grain volume: up 23% in revenue ton-miles, with grain freight sales up 29% to $904 million
- Intermodal container volume: up 10% in revenue ton-miles, with container sales up 22% to $815 million
- Metals, minerals and consumer products volume: up 8% in revenue ton-miles, with sales up 16% to $532 million
- Coal volume: down 11% in revenue ton-miles, a smaller drop than the 29% fall in the second quarter
This acceleration matters because customer mine problems in coal had held back the whole network in the first half of the year. Grain and container shipments are now growing fast enough to overcome the smaller coal drag and lift total volume into the middle single digits.
What to watch: fourth-quarter revenue ton-miles. Reaching the middle of the full-year volume plan requires about 8.3% growth in the final quarter by our math.
Higher Prices and Faster Trains Helped Margins
Railroads measure profitability using the operating ratio, which is operating costs as a percentage of revenue, so a lower number is better. After a drop in unit revenue in the first quarter, CPKC raised its freight revenue per revenue ton-mile by 8.8% from a year ago, or 7% excluding currency moves, to 7.20 cents.
Trains also ran faster. Average train speed rose 8% from a year ago to 20.5 miles per hour, and terminal dwell time — how long railcars sit in yards — fell 7% to 9.4 hours. Staff compensation and benefits held steady as a share of revenue at 16.9%, while purchased services and other overhead fell by 1.3 percentage points of revenue. Excluding the 1.9 percentage point hit from higher fuel prices, the core operating ratio excluding one-offs improved by 0.7 percentage points to 60.0% by our math.
What to watch: the core operating ratio excluding one-offs in the fourth quarter. Management previously agreed that a reading below 60% for the second half of the year was a fair target, which requires a strong drop from 61.9% in the third quarter.
🐻 Bear Case
Higher Diesel Prices Pushed Operating Margins Worse
"CPKC delivered solid results, powered by momentum across our unrivalled North American network, countering macroeconomic headwinds during the quarter," Creel said. Yet the headline operating ratio moved the wrong way for a second straight quarter because diesel prices jumped.
The railway paid an average of $4.49 US per gallon for locomotive fuel, up 53% from $2.94 a year ago. Even though locomotives burned 3% less fuel per ton-mile, total fuel expense rose 61% to $667 million, climbing by 4.5 percentage points of revenue to 15.8% by our math.
CPKC passes fuel costs to customers through fuel surcharges, which lifted top-line revenue. Because surcharges only recover the cost without adding profit, they dilute the margin percentage and lag behind rising pump prices. That pushed the reported operating ratio up 1.3 percentage points to 64.8%, and the core operating ratio excluding one-offs up 1.2 percentage points to 61.9%.
What to watch: average fuel price per gallon in the fourth quarter. A drop or plateau in diesel prices would let lagged fuel surcharges catch up and stop hurting the operating ratio.
Full-Year Plan Still Needs a Big Fourth Quarter
"Supported by disciplined execution and a robust commercial pipeline, we remain on track to meet our commitments for the year," Creel said. Those commitments call for profit per share excluding one-offs to grow in the low double digits from $4.61 in 2025, and freight volume in revenue ton-miles to grow in the middle single digits.
Through the first nine months of 2026, profit per share excluding one-offs is up 8.8% to $3.57, and revenue ton-miles are up 3.9%. By our math, hitting the 10% floor of the profit plan requires fourth-quarter profit per share excluding one-offs to grow 12.9% to $1.50, while the 11% middle of the range requires 16.3% growth to $1.55. Reaching the 5% middle of the volume plan requires 8.3% volume growth in the fourth quarter.
Last year CPKC missed its full-year profit growth plan of 10% to 14%, finishing at 8.5%. While fourth-quarter volume compares against a flat period last year, fourth-quarter profit compares against a record 55.9% core operating ratio.
What to watch: fourth-quarter profit per share excluding one-offs against the $1.50 floor needed to reach 10% full-year growth. Falling short would mean a second straight annual miss.
Borrowing Funded Part of the Share Buybacks
CPKC has been buying back its own stock under a programme allowing it to repurchase up to 44.9 million shares before February 2027. These buybacks cut the diluted share count by 3.7% from a year ago to 877.6 million, which helped per-share profit grow faster than net income.
In the third quarter, the railway spent $1,425 million in cash to buy 11.5 million shares at an average price of $128.80, up from $119.60 in the second quarter. That cash outflow exceeded the $1,018 million of adjusted free cash the business generated in the quarter. Management covered the gap by issuing $711 million of net short-term commercial paper, taking commercial paper debt to $2,179 million and adjusted net debt to $26.4 billion, or 3.2 times trailing cash profit (EBITDA). In October, the company issued another $1.8 billion in long-term notes.
What to watch: fourth-quarter share repurchases and the ratio of adjusted net debt to EBITDA. Buying back the remaining 16.8 million shares on the authorization would keep debt leverage elevated above 3 times.
Personal Injuries Rose and Merger Costs Mounted
Two operational and competitive pressures persisted during the quarter. First, rival US railways Union Pacific and Norfolk Southern are seeking regulatory approval from the US Surface Transportation Board to merge, which would create a giant transcontinental competitor. CPKC spent $17 million in the third quarter, and $44 million over the first nine months, on advisory and advocacy costs related to that review.
Second, while the rate of train accidents per million train-miles dropped 60% from a year ago to 0.46, employee personal injuries moved the other way. Personal injuries per 200,000 employee-hours rose 20% from a year ago to 1.12, following a 32% rise in the second quarter.
What to watch: fourth-quarter personal injury frequency and quarterly regulatory advisory spending. Continued rises in worker injuries or rival merger expenses would add ongoing costs to operations.
👓 Other Themes
Tax Audits and Cross-Border Trade Headwinds
Two tax audits reduced reported profit by 13 cents per share in the third quarter. CPKC recorded a $94 million tax charge after the Canada Revenue Agency reassessed prior tax years linked to the Kansas City Southern acquisition, and a $17 million charge to settle 2020 and 2021 Mexican tax audits, while a $528 million Mexican assessment from 2014 remains in arbitration. Separately, cross-border automotive volume fell 5% in revenue ton-miles.
💲 Other KPIs
Cash left after capital spending and excluding one-off items more than doubled from $415 million a year ago. Operating cash flow rose 22% to $1,550 million on higher operating profit and working capital inflows, while cash spent on track and property additions fell 29% to $618 million.
Money owed by customers rose 6.0% from $2,118 million a year ago, growing at less than half the 15.2% pace of revenue. That signals timely cash collection from shippers even as fuel surcharges lifted total billings.
🔮 Guidance
Unchanged. Creel said the railway remains on track to meet its full-year commitments, which call for low double-digit growth over last year's $4.61. With nine-month profit per share excluding one-offs up 8.8% at $3.57, hitting the 11% middle of the range leaves about 16.3% growth to $1.55 for the fourth quarter by our math.
Unchanged. The full-year plan still calls for freight volume in revenue ton-miles to grow in the middle single digits. Because volume grew 3.9% over the first nine months, reaching the 5% middle of the range requires about 8.3% growth in the fourth quarter by our math, helped by a flat comparison period a year ago.
Unchanged. The full-year plan for property and track additions remains about $2.65 billion, down 15% from $3.14 billion in 2025. After spending $2,053 million in the first nine months, the plan leaves about $597 million of capital spending for the fourth quarter by our math, down 25% from a year ago.
❓ Key Questions
What are the current synergy and Canada-Mexico revenue run-rates?
Management previously targeted $1.4 billion to $1.5 billion in annualized merger synergies and $600 million in Canada-Mexico land-bridge revenue by the end of 2026. The release did not update either figure.
Do the 2024–2028 Investor Day growth targets still stand?
The multi-year plan calls for high-single-digit annual revenue growth through 2028. With 2025 revenue up 4% and 2026 nine-month revenue up 8% mainly on fuel surcharges, investors need to know if the multi-year target remains intact.
Will CPKC finish its 44.9 million share buyback this year?
The railway has repurchased 28.1 million shares through September and issued $1.8 billion in new notes in October. Finishing the remaining 16.8 million shares by year-end would require about $2.2 billion more in cash.
How much did Mexico Midwest Express volume grow in Q3?
CPKC reported growth for its flagship Mexico-to-Chicago intermodal train every quarter in 2025 and the first quarter of 2026, but omitted the figure in the second and third quarters.