Canadian Pacific Kansas City (TSX: CP) transformed itself into a railway powerhouse, and the numbers are starting to show it. Over the past year, CPKC stock has climbed more than 30%, outperforming both the TSX and its North American rail peers. But after a strong run and an ambitious integration effort that stretches from Canada to Mexico, investors are asking: Is there still fuel in the tank?
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Into earnings
The Canadian stock’s second-quarter results point to a resounding yes. Revenue rose 3% year over year to $3.7 billion, while core adjusted earnings per share (EPS) came in at $1.12, up 7% from a year ago. The reported operating ratio improved to 63.7%, a meaningful 110-basis-point drop from Q2 last year. Even more encouraging, volumes were up 7% across the board, suggesting demand is firming up in everything from intermodal to bulk commodities.
One of the most promising developments this year has been the launch of the Southeast Mexico Express. In partnership with CSX, this new corridor links Texas, Mexico, and the southeastern U.S. This gives CPKC a first-mover advantage in cross-border rail freight. It also turns CPKC into the only Class I railway with a single-line network touching all three North American countries. With the automotive and intermodal sectors leaning heavily on efficient and sustainable transportation solutions, that kind of coverage is both a geographic win and a growth engine.
Steady as she goes
CPKC isn’t just growing through geography, though. The Canadian stock sold its 50% stake in the Panama Canal Railway for a hefty pre-tax gain of $333 million, which padded Q2 earnings. But even without that one-time boost, core operations are improving. Grain, energy, and intermodal volumes all posted strong results. Automotive was down slightly, but that’s likely tied to cyclical fluctuations rather than systemic weakness. And from a safety standpoint, the Canadian stock reported a decrease in personal injury frequency, even if train accidents ticked up slightly.
Financially, the Canadian stock is in good shape. It repaid US$930 million in maturing notes and issued a slate of longer-dated bonds, locking in funding through 2055. At the same time, it kept its $2.2 billion credit facility undrawn, and commercial paper borrowings have dropped by over 75% since the end of 2024. This gives CPKC plenty of flexibility to fund infrastructure improvements or lean into growth opportunities without jeopardizing its balance sheet.
Considerations
Of course, the KCS acquisition and integration still bring some risks. Cross-border logistics aren’t always smooth, and there are legacy tax issues being worked through in Mexico. But the hard part of the merger appears to be behind them. The Canadian stock’s ability to move forward while maintaining efficiency shows that the integration is now starting to pay off.
Valuation-wise, CPKC is no longer cheap. It trades at over 30 times trailing earnings and roughly 25 times forward estimates. That’s more expensive than most North American railroads. But you’re paying for a unique network and growth runway. Few companies can say they offer end-to-end service from Canadian grain fields to Mexican ports, all under one operational umbrella.
Bottom line
In the quarters ahead, watch for how volumes evolve across southern corridors, especially if the Southeast Mexico Express continues gaining traction. Also keep an eye on operating ratio improvements as more synergies from the KCS deal come through. If the Canadian stock can maintain cost discipline while boosting volume, it could surprise to the upside.
Canadian Pacific Kansas City may not be a screaming bargain, but it doesn’t need to be. It’s a rare infrastructure stock with long-term growth potential and one of the most exciting footprints in transportation. For investors looking to add a high-quality compounder to their portfolio, it still looks like a solid buy.
