Canadian Pacific Kansas City (CP)
Only Class I railroad spanning Mexico, the US and Canada: FY2025 core adjusted operating ratio 59.9%; intermodal 39.4% of carloads, 18% of freight revenue.
Educational analysis for professional use. This profile is not investment advice or a recommendation to buy or sell any security, and it is not personalised.
Snapshot
Which Operating Ratio You Quote Matters
Canadian Pacific Kansas City's two operating ratios sit 2.9 points apart, the widest gap among the five listed Class I railroads (the top revenue tier of North American freight rail), so the basis has to travel with the number. The operating ratio is operating expenses as a share of revenue. CPKC's FY2025 reported figure was 62.8%, down 160 bps from 64.4%. Its core adjusted figure, which strips out items management classes as non-core, was 59.9%, down 140 bps from 61.3%. On the adjusted line CPKC was second lowest, after Union Pacific's 59.3%; on the reported line it was third. The operating ratio guide explains why the order changes.
CPKC's filings also state that it is the only Class I with one contiguous network across Mexico, the US and Canada, so traffic can cross all three countries without being handed to another railroad. The guide to precision scheduled railroading (running trains to a fixed timetable whether or not they are full) sets CPKC's ratios beside the other four. Market value was roughly US$79.7 billion on 10 June 2026 (887.7 million shares in the Q1 2026 quarterly filing × $89.75 NYSE close). Operating figures below are in Canadian dollars unless noted.
Revenue Mix vs Carload Mix
Intermodal traffic, containers and trailers on flat cars with each counted as one carload, is 39.4% of CPKC's carloads but 18% of its freight revenue. Bulk (36%) and merchandise (46%) carry the revenue weight. CPKC moved 1,780.6 thousand intermodal carloads in FY2025, up 8% from 1,642.9 thousand, within 4.514 million in total (+3% from 4.370 million). Freight revenue was C$14,776 million.
Measured in revenue ton-miles (RTMs, one ton of paying freight moved one mile), intermodal was 38,473 million of 219,420 million, or 17.5%; total RTMs rose 4%. CPKC discloses all three shares, and the intermodal guide uses the spread between them to teach revenue against volume.
Pricing, and a Return Not Yet Published
Freight revenue per carload was C$3,273, up 1% as reported and down 1% after adjusting for exchange rates. Revenue per RTM was 6.73 cents, flat on 2024 and down 1% FX-adjusted. On the Q4 2025 call management said contract renewals were running above a 3 to 4% long-term outlook, against labour inflation locked at 2.5 to 3%. That was a remark on a call; the filings contain no ratio comparing pricing with inflation.
CPKC does not publish ROIC for FY2025, though its earnings release targets a return to double-digit core adjusted ROIC under the 2024 to 2028 plan. The operating ratio and free cash flow are the filed measures to work from.
Buybacks Ran Ahead of Free Cash Flow
CPKC paid C$3,942 million in cash for buybacks in FY2025, more than its free cash flow on either measure, so part was funded from other sources. Free cash flow worked out from the GAAP statements was C$2,207 million (operating cash flow of C$5,309m less capex of C$3,102m); the company does not report it as a line item. Its own non-GAAP adjusted free cash, which excludes equity-sale proceeds, acquisition costs and similar items, was C$2,283 million.
The buyback cancelled 37.3 million shares at a C$107.61 average, C$4,019m including fees and tax. With C$796m of dividends, shareholders received C$4,738 million. Union Pacific measures free cash flow after dividends, so a payout comparison with it or CSX needs one definition on both sides.
What to Watch in the Financials
The reconciliation between the two ratios. The market tends to quote core adjusted for peer comparison, but the reported ratio is what reaches GAAP operating income.
Intermodal growth. Intermodal carloads grew faster than the total, and when a lower-revenue category leads, ton-miles can rise faster than revenue unless pricing keeps up.
Revenue arrives in Canadian dollars, US dollars and Mexican pesos, so the currency-adjusted figures are the better read on pricing.
Valuation Framework
Railroads are usually read on operating ratio and return on capital first, then valued on EV/EBITDA using normalised earnings. For CPKC that means Canadian-dollar EBITDA set against a US-dollar NYSE market value, converted at a stated date. Primary filings publish no peer multiple table.
Two things need care in normalising CPKC's earnings. The core adjusted ratio removes more than any peer's adjusted measure, so check which removed items recur. And one year of buybacks ahead of free cash flow cannot show that the pace is repeatable.
Key Risks
Operating in three countries means three regulatory regimes and three currencies. With a Canadian-dollar earnings base and a US-dollar market value, any trailing multiple picks up translation noise.
Bulk ties CPKC to grain, potash and coal cycles that intermodal-heavy eastern US railroads feel differently. Merchandise, the larger share of revenue, balances that without removing the swings.
Peer Context
Canadian National, the transcontinental Canadian peer, reported a 61.7% adjusted ratio and 13.0% adjusted ROIC (FY2025, CAD). Union Pacific published 16.3% adjusted ROIC, with intermodal at ~40% of carloads. The Railroads Sector Primer sets all five side by side on filed operating data.
The operating ratio fades year by year off volume, revenue per unit and capex, feeding a value per share checked against return on capital.
The Excel model is the primer's railroad build live across 11 sheets: revenue from volume and revenue per unit, an operating ratio that fades year by year, a valuation for a mature compounder and an improvement story, a margin bridge, return on capital against the cost of capital, free cash flow and capital returns, and a sensitivity grid. Change the operating ratio path or capex and the value moves.