Canadian Pacific Kansas City (CP) Financials

Canadian Pacific Kansas City (NYSE: CP) has demonstrated consistent financial growth over the past four years, with particular strength in revenue generation and net income. Examining the quarterly results and annual trends provides investors with a clear view of the company's profitability, cash flow, and balance sheet health.

Key Positive Trends:

• Revenue Growth: Total revenue has generally increased, reaching $2.72 billion in Q2 2025, up from $2.39 billion in Q2 2024 and from $1.67 billion in Q1 2023, reflecting stable demand and effective pricing strategies.
• Consistently Strong Net Income: Net income has shown positive growth from $591 million in Q1 2023, $659 million in Q2 2024, to $906 million in Q2 2025.
• Operating Income Stability: Operating income has remained robust, with over $980 million in Q2 2025, showing good control over operating expenses relative to revenue.
• Solid Operating Cash Flow: Net cash from operating activities increased to approximately $1.04 billion in Q2 2025, reflecting cash-generative operations supporting the company’s growth and capital expenditures.
• Investment in Capex: Canadian Pacific is investing heavily in property, plant, and equipment (PPE), with capital expenditures of $573 million in Q2 2025, supporting long-term growth and network expansion.
• Strong Equity Base: Total common equity has grown steadily to $33.9 billion by Q2 2025, indicating a solid financial foundation and shareholder value growth.
• Earnings Per Share Improvement: Basic EPS rose from around $0.61 in Q1 2024 to $0.98 in Q2 2025, showing improving profitability on a per-share basis.
• Dividend Growth: Cash dividends per share increased from $0.13 in Q1 2024 to $0.17 in Q2 2025, demonstrating management’s commitment to returning capital to shareholders.
• Leverage Management: Although total liabilities increased, the company's debt profile shows ongoing repayments and issuances to optimize capital structure.
• Goodwill and Intangible Assets: The company maintains a significant asset base in goodwill and intangible assets, which have remained relatively stable, reflecting the value of acquired businesses and intellectual property.

Neutral Observations:

• Fluctuations in Other Operating Expenses: "Other Operating Expenses" vary each quarter but remain a significant cost component. Management efficiency in this area will impact future earnings.
• Cash Interest Paid: Interest expenses remain significant at around $178 million in Q2 2025 but have been fairly consistent, indicating stable refinancing and borrowing costs.
• Exchange Rate Effects: Foreign exchange impacts resulted in a cash outflow of approximately $32 million in Q2 2025, a normal business risk factor given international operations.
• Shares Outstanding: The weighted average shares outstanding have remained stable around 920-930 million shares, reducing concerns of dilution.
• Operating Cost of Revenue: Despite increasing revenues, the operating cost of revenue has fluctuated, warranting attention to cost control to maintain margins.

Potential Concerns:

• High Debt Levels: Total debt remains material with over $15.5 billion in long-term debt as of Q2 2025, requiring ongoing management to avoid pressure on cash flow from interest and principal repayments.
• Repurchase of Common Equity: In Q2 2025, Canadian Pacific repurchased about $1.04 billion in common equity, a large use of cash that reduces liquidity and might constrain investments.
• Declining Net Cash from Financing Activities: Net cash used in financing activities increased significantly to over $680 million in Q2 2025, primarily due to debt repayments and repurchases.
• Volatility in Other Income / Expense: Some quarters reflect significant negative other income/expense impacts, such as losses caused by market or investment factors, affecting pre-tax income variability.
• Investing Cash Flow Negative: Heavy capital expenditures cause a consistent negative cash flow from investing activities, pressuring the company's free cash flow position.

Summary: Canadian Pacific Kansas City is demonstrating solid growth in revenue and profitability with strong cash flow from operations and a commitment to shareholder returns through dividends and buybacks. However, its elevated debt levels, high capital expenditure demands, and significant equity repurchases pose some risks that investors should monitor closely. The company remains financially strong with strategic investments positioned to sustain future growth.