Canadian Pacific Kansas City (NYSE: CP) posted a second-quarter revenue record and higher operating income, driven by strength in grain, automotive, and energy-related shipments.

CPKC began operating as a combined railroad just over a year ago, following Canadian Pacific's acquisition of Kansas City Southern — a deal that created the first and only freight railway linking Canada, the United States, and Mexico on a single network.

"The performance, if you look at it, reflects the strength of the CPKC franchise, the resilience of our business mix, and the continued benefits of uniquely connecting Canada, U.S., and Mexico," Chief Executive Keith Creel told analysts and investors on the railway's earnings call Wednesday.

Operating income rose 10% to US$1.06 billion, while revenue grew 13% to $3 billion. Adjusted earnings per share increased 13% to $0.91.

CPKC's operating ratio — a closely watched industry efficiency measure where a lower percentage signals stronger performance — was 64.6%, up 0.9 points from a year earlier, as operating expenses climbed 14% with fuel costs surging 53% for the quarter.

Volume increased 4% for the quarter on a revenue ton-mile basis — CPKC's preferred metric — but remained flat when measured by carloads and containers. "During the quarter, we established volume records in grain; energy, chemicals, plastics; and automotive," Creel said.

All of CPKC's key operating metrics improved year over year. Average train speed increased 7%, while terminal dwell fell 16%. Chief Operating Officer Mark Redd noted the railway set second-quarter records for average train speed, dwell, locomotive productivity, and fuel efficiency. The gains come compared to a year ago, when the railway was grappling with congestion on former Kansas City Southern territory in the U.S. following a computer system cutover as part of its post-merger integration.

On the equipment front, Redd said CPKC has received all 70 Wabtec ET44AC locomotives scheduled for delivery this year and will soon take delivery of the first units from its order of 65 EMD SD70ACe-T4s from Progress Rail.

Chief Marketing Officer John Brooks reported Canadian grain volume surged 24%, fueled by a record harvest and continued growth in shipments to Mexico. U.S. grain volumes rose 14%, driven by robust demand in Mexico and exports through the Pacific Northwest.

Coal presented a stark contrast, with volume plummeting 29% due to production challenges at southern British Columbia mines. The decline was significant enough to reduce CPKC's overall revenue growth by 3% during the quarter. Brooks noted that while coal production is recovering, volumes will remain pressured for the rest of the year.

Despite headwinds from elevated interest rates and lower U.S. housing starts, CPKC posted a record June for lumber shipments. Steel volumes also improved across both domestic and land-bridge lanes connecting Canada and Mexico.

Domestic intermodal volumes edged up 3%. The cross-border SMX interline intermodal service linking Mexico and Texas with CSX (NASDAQ: CSX) terminals surged 30% compared to the first quarter, when dedicated stack trains launched using the new interchange at Myrtlewood, Alabama, on the former Meridian & Bigbee short line.

"We are seeing signs of improving truck-to-rail conversion opportunities supported by higher fuel prices, tighter regulatory enforcement, and reduced trucking capacity," Brooks said.

Safety metrics, however, deteriorated. The railway's employee injury rate climbed 32% for the quarter, and the train accident rate rose 3%.

"While we are disappointed by these results, we remain fully committed to continuous improvement," Redd said. "Safety is a journey that requires constant diligence, learning, and engagement. We're taking action to address the underlying trends and remain focused on ensuring every employee returns home safe."