Canadian Pacific Kansas City NYSE: CP reported first-quarter 2026 results that management described as a “strong start” to the year, highlighted by record grain volumes and continued operating improvements, even as foreign exchange and fuel dynamics weighed on revenue yield and earnings comparisons.
Q1 results: revenue of CAD 3.7 billion, core adjusted OR of 63%
President and CEO Keith Creel said the company delivered “revenues of CAD 3.7 billion, volume growth 2% on an RTM basis, operating ratio 63%, and earnings of CAD 1.04,” attributing the performance to “strong execution across the board operationally, commercially, and financially.” He noted Q1 included “some impacts from volatile fuel and FX markets,” but added that management was “very pleased with the underlying performance and our strong start to the Q2.”
Chief Financial Officer Nadeem Velani reported a reported operating ratio of 66% and a core adjusted operating ratio of 63%, which he said was “up 50 basis points from last year.” Diluted EPS was CAD 0.94, while core adjusted diluted EPS was CAD 1.04, down 2% year over year. Velani attributed the EPS decline in part to “approximately CAD 0.04 of impact from a foreign exchange and CAD 0.03 of impact from changes in fuel price,” plus another CAD 0.01 tied to FX losses on cash and working capital below the line.
Operational performance: productivity gains and capital investment updates
EVP and COO Mark Redd said the network delivered “record Q1” operational performance and continued a “clear pattern of continuous improvement since the merger.” Redd outlined improvements since Q1 2024, including train weight up 9%, train length up 7%, locomotive productivity up 8%, fuel efficiency up 2%, and system velocity up 4%.
Redd said the company is pursuing “focused velocity initiatives across the key north-south network” and provided an update on capital deployment. CPKC has received 36 of 100 new Tier 4 locomotives (in addition to 100 delivered in 2025), which he said are improving efficiency and reliability, particularly in Canada. He also said the company completed capital improvements on its portion of the SMX east-west corridor, enabling speeds “up to 49 miles an hour on this network.”
Commercial performance: record grain, coal headwinds, and improving yield trends
EVP and CMO John Brooks said the company posted “a record Q1 RTM growth” and noted that freight revenue fell 3% despite 2% RTM growth, with cents per RTM down 4%. Brooks said pricing remained solid, with renewals “exceeding the top end of our long-term 3%-4% outlook,” but yield was pressured by FX, the removal of the federal carbon tax in Canada, and negative mix.
Brooks said cents per RTM in April “has inflected positive,” driven by pricing, lapping the carbon tax removal, a macro tailwind from higher fuel prices, and moderating mix headwinds. In Q&A, he added that quarter-to-date cents per RTM were “up relative to last year quarter to date about 5%.”
In bulk, Brooks said Q1 was “a record quarter for grain across revenue, RTMs, and car loads,” with revenue up 14% on 12% volume growth. He cited Canadian grain volumes up 13% supported by a record harvest, and U.S. grain volumes up 12% driven by a record corn crop and higher volumes to Mexico and the Pacific Northwest. Brooks also said the company saw a “50% increase in trains from Canada and the U.S. into Mexico.”
Potash revenue declined 2% on 2% volume growth, which Brooks attributed to strong export demand and pricing/mix dynamics. He said Canpotex was “fully committed through the H1 of the year,” and that potash should remain a “solid contributor” in 2026.
Coal was a key drag. Brooks said coal revenue fell 11% on a 10% reduction in volumes due to “unexpected production-related issues at customer mines,” reducing Q1 RTMs by “over 1%.” In response to an analyst question, Brooks said the company expected to “continue to struggle somewhat through Q2,” with some optimism for improvement in the second half, though he cautioned that the first-half shortfall would be “hard to make up” for the full year.
In merchandise, Energy, Chemicals, and Plastics revenue and volume declined 5% due to lower refined fuel volumes to Mexico, reduced Pemex heavy fuel oil shipments, and a plastics plant closure late last year. Forest products revenue fell 14% on a 10% volume decline, which Brooks linked to tariffs on Canadian lumber exports to the U.S. and broader housing-related softness. Metals, minerals, and consumer products revenue declined 1% on 3% volume growth, with gains from construction-related aggregates and industrial development partially offset by tariff impacts on cross-border steel.
Automotive revenue declined 6% on 2% volume growth, which Brooks said reflected difficult comparisons from pull-forward shipments ahead of tariffs last year, even as the business benefited from new wins and a 13% increase in average length of haul tied to land-bridge shipments from Mexico to Canada.
Intermodal revenue fell 1% on 3% volume growth. Brooks said international intermodal volumes increased 8% on Vancouver business, while domestic intermodal volumes declined 1%. He highlighted that the MMX train rose 12% year over year, marking the “ninth consecutive quarter of double-digit growth.”
Brooks also announced extended long-term contracts with Hapag-Lloyd and Loblaw Companies, calling them renewals that also included “new tentacles” tied to cross-network opportunities across Canada, the U.S., and Mexico.
Financial and capital allocation: buybacks, dividend increase, and cost items
Velani said CPKC repurchased CAD 680 million of shares in the quarter and noted “shareholder return spend increased 69% in Q1.” Creel said the company announced a new share repurchase program of “up to 45 million shares,” and Velani later told analysts he expected the company would complete it “by the end of the year.”
The company also increased its quarterly dividend by 17.5%. Velani said the move reflected a “balanced” approach and noted the company is “at the lowest payout ratio in the industry” and has room to grow the dividend over time.
On expenses, Velani said compensation and benefits rose 2% (FX-adjusted), driven by wage inflation and higher stock-based compensation, partially offset by productivity gains. In Q&A, he quantified stock-based compensation as “about CAD 15 million headwind in the quarter, so a little over CAD 0.01.” Fuel expense was CAD 458 million, down 4% year over year, reflecting the elimination of Canada’s federal carbon tax, improved efficiency, and a contract discount, partially offset by diesel benchmark prices.
CPKC reiterated its full-year capital spending plan. Velani said the company remained on track for full-year CapEx of CAD 2.65 billion, representing a 15% reduction year over year.
Outlook: management expects re-acceleration in Q2, notes April as a record month
Velani said Q1 was “very much according to plan,” but cited currency comparisons and fuel/carbon tax-related timing as major factors weighing on results. He told analysts that April “is gonna be a record month for us across the board and in CPKC history,” and said management had “strong confidence” in “strong double digits here in Q2” and a “very good back half.” Velani also said he expected the company to “return to double-digit EPS growth here in Q2 and the H2” and to deliver “full-year double-digit EPS guidance.”
On the operating ratio, Velani said the company could achieve a sequential improvement consistent with historical patterns and added, “I think we were 59.9 last year. I think we could improve on that for 2026.” Creel noted the company was “about to lap Darien,” referencing last year’s disruption beginning in May, which he said drove “unnecessary cost and pain and velocity and assets,” and suggested a more fluid network should help both costs and revenue going forward.
In closing remarks, Creel said the company began the second quarter “with a lot of momentum” and remained focused on execution “operationally, commercially, and financially.”
About Canadian Pacific Kansas City NYSE: CP
Canadian Pacific Kansas City (CPKC) is a North American Class I freight railroad formed through the combination of Canadian Pacific Railway and Kansas City Southern. The merged company operates an integrated rail network that spans Canada, the United States and Mexico, providing a single-line rail connection across all three countries. This transborder footprint is intended to streamline cross-border freight flows and provide shippers with direct rail access from Canadian and U.S. production centers to Mexican markets and ports.
CPKC's core business is freight transportation and related logistics services.
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