CPKC Sees Higher Q4 Profits, Forecasts Continued Growth Despite Trade Concerns

Analytics

CPKC Sees Higher Q4 Profits, Forecasts Continued Growth Despite Trade Concerns

CALGARY, Alberta — Canadian Pacific Kansas City (NASDAQ: CP) reported higher fourth-quarter profits and revenue as the railway's merger-related synergies accelerated. CEO Keith Creel highlighted, "Despite a number of challenges, we delivered on the guidance set out at the start of the year to produce double-digit earnings growth. And we did it safely."

Despite economic uncertainties and trade tensions, particularly with potential 25% tariffs on goods from Canada and Mexico, CPKC anticipates revenue ton-miles to grow by 4% to 6% this year, potentially driving earnings growth of 12% to 18%.

A Unique Position in North American Trade

With its unique rail network connecting Canada, Mexico, and the U.S., CPKC stands as the Class I railroad most dependent on North American trade. Creel expressed confidence, "We've entered 2025 with tremendous momentum that we expect to build on. The long-term fundamentals of the North American economy and trade between these countries remain unchanged."

However, trade negotiations' impact remains uncertain. Creel underscored the interlinked economies, citing the auto industry as an example. Engines and transmissions made in the U.S. are shipped to Mexican assembly plants, which then export finished vehicles to U.S. dealers.

Investing Amidst Complexity

CPKC continues investing in cross-border capacity in anticipation of ongoing traffic growth. Mark Redd, Chief Operating Officer, noted, "Eight new passing sidings and segments of centralized traffic control (CTC) entered service in the U.S. The Patrick J. Ottensmeyer International Bridge over the Rio Grande has doubled CPKC's capacity at this crucial rail gateway."

The railway plans to continue adding passing sidings and CTC this year on its north-south spine linking the Midwest and Mexico. Redd emphasized the alignment of these investments with CPKC's growth outlook.

Fourth Quarter Highlights and Future Outlook

For the fourth quarter, CPKC's operating income increased 8%, reaching CA$1.5 billion, with revenue growing 2% to CA$3.87 billion. Adjusted earnings per share rose 9%. For the full year, operating income grew 18%, with a revenue increase of 16%.

Brooks outlined merger-related synergies driving growth, such as Canadian grain exports to Mexico and automotive gains, aided by the new CPKC auto terminal.

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CPKC led the industry with the lowest train accident rate in 2024, demonstrating a tangible commitment to safety and efficiency.

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