$CP · CANADIAN PACIFIC KANSAS CITY LTD/CN
Canadian Pacific Kansas City Limited filed its Q3 FY2026 10-Q, reporting C$4.219B in total revenue (+15% YoY) on 5% carload volume growth and 9% higher freight revenue per revenue ton-mile. Net income was essentially flat at C$916M vs C$917M a year ago, as a C$252M surge in fuel costs and a jump in the effective tax rate to 32.79% from 24.34% offset the revenue gains. Diluted EPS was C$1.04 vs C$1.01; adjusted diluted EPS was C$1.28 vs C$1.10.
- Q3 revenue C$4.219B, up 15% YoY, driven by 5% carload growth and 9% higher freight revenue per RTM
- Q3 net income C$916M, essentially flat vs C$917M a year ago despite the revenue surge
- Fuel expense soared 61% YoY to C$667M in Q3, the single largest cost headwind
- Effective tax rate jumped to 32.79% in Q3 vs 24.34% a year ago, compressing net income
- Nine-month net income fell 9% to C$2.785B from C$3.060B, with prior year boosted by C$333M gain on Panama Canal Railway sale
Extended-hours trading shows CP at $87.23, down 2.46% vs the regular close of $89.43. The flat net income despite 15% revenue growth — driven by fuel cost inflation and a higher tax rate — appears to be weighing on sentiment.
A 15% revenue jump producing zero net income growth is a stark margin-compression story — fuel and tax headwinds are swallowing CPKC's otherwise strong operational momentum.
CPKC's 15% revenue growth outpaces typical North American Class I rail peers, but the 61% fuel cost spike and margin compression mirror industry-wide inflationary pressures. The 64.8% operating ratio (vs 63.5% a year ago) shows deteriorating efficiency.
Fuel expense volatility is acute: Q3 fuel costs rose 61% YoY to C$667M, and the filing notes operations are subject to seasonal fluctuations and weather conditions. The effective tax rate swing from 24.34% to 32.79% in Q3 adds earnings unpredictability.