Canadian Pacific Kansas City reported second quarter 2025 revenue of 3.7 billion, a three percent increase, with reported operating ratio improving 110 basis points to 63.7 percent and diluted EPS of 1.33, as the network integration matures and cross border flows deepen. Volumes in revenue ton miles rose seven percent, underscoring scale benefits from the single line Canada, U.S., Mexico footprint that regulators approved in 2023, which remains the structural driver of service differentiation today. Freight rail remains a capital intensive, cyclical business. The core setup is intact, based on the company’s Q2 2025 release.
Sharpen mix and execution
From Q2 detail, grain revenue rose 12 percent year over year to 743 million, intermodal was steady at 712 million for energy, chemicals and plastics revenue, and potash declined seven percent to 167 million, illustrating how commodity price and export logistics shift realized yield by lane and product mix over a half. That mix matters. A one to two point swing in operating ratio moves free cash meaningfully over a full year when layered on 3.7 billion quarterly revenue, and the company’s core adjusted operating ratio at 60.7 percent indicates additional synergy capture on top of reported metrics in the period. The Surface Transportation Board described the asset as the first railway offering end to end service across the three countries, noting, “CPKC will be the first railroad with single-line service through Canada, the United States, and Mexico,” said the Surface Transportation Board. That remains the competitive anchor.
Manage grain and labour risks
Precedent shows crop quality can trump volume, and recent Canadian Grain Commission sampling flagged durum quality concerns tied to late season moisture in parts of Saskatchewan, which could reduce export grade volumes and pressure unit revenues for select corridors into the winter shipping season. It bears monitoring.
Early samples showing sprouting and mildew damage in durum as of September 22, 2025, which could alter the mix toward lower value shipments if discounts widen at destination mills as quality screens tighten, a scenario that can raise cycle times and lower realized pricing on backhauls if elevators reshuffle inventory grades across port programs, especially at Vancouver and Thunder Bay, and shippers switch to alternative pulses or feed channels depending on bids and storage. The quality caveat is not universal. It is regional and evolving, but it is real, per Reuters reporting on CGC samples. Labour risk remains elevated in the sector, though CPKC reached a tentative four year collective agreement with Unifor in January covering about 1,200 Canadian mechanical employees, which removes one near term uncertainty within its control while larger multi union bargaining cycles continue to shape sector risk premia in Canada. Details were not disclosed pending ratification, but the company noted the agreement supports customer service continuity, per its January 27, 2025 statement.
Lean into cross border corridors
Practically, investors should watch the cadence of merchandise and intermodal velocity metrics implied by revenue ton miles and carloads, and the spread between reported and core adjusted operating ratios as purchase accounting effects fade and Mexican tax items normalize against year ago periods, because sustained improvement here signals throughput gains that compound pricing actions negotiated in annual contracts. Focus on throughput.
The key positive in the quarter is that operating ratio improved alongside seven percent RTM growth, which indicates cost discipline is keeping up with train length and crew productivity as the southern U.S. integration issues mentioned by management earlier in the year are worked through, a necessary condition to support capex returns on longer trains and terminal expansions through 2026. “Our exceptional team of railroaders again delivered strong operating and financial results in the second quarter,” said Keith Creel. That is management’s frame.
For positioning, the implication is straightforward, steady operating ratio progress with grain variability and labour seasonality as the principal domestic swing factors, and cross border merchandise growth as the structural offset through 2025. The network is the asset. Not a recommendation, for information only.
