A month has gone by since the last earnings report for Canadian Pacific Kansas City (CP). Shares have lost about 4.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Canadian Pacific Kansas City due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Q4 Earnings Beat at CP

Canadian Pacific Kansas City reported fourth-quarter 2024 earnings (excluding 1 cent from non-recurring items) of 92 cents per share, which beat the Zacks Consensus Estimate of 87 cents. The bottom line improved 5.8% on a year-over-year basis. Results were aided by strong operational efficiency.

Operating revenues of $2.77 billion beat the Zacks Consensus Estimate of $2.72 billion. However, the top line declined on a year-over-year basis due to synergies and robust operational and safety performances.

In the reported quarter, total freight revenues per revenue ton miles increased 1% year over year. Total Freight revenues per carload increased 7% year over year.

On a reported basis, the operating income was up 8%. Total operating expenses declined 20% year over year due to cost-cutting efforts. The reported operating ratio (operating expenses as a percentage of revenues) improved 210 basis points to 59.7% from 61.8% in the year-ago quarter. A lower value of the metric is more desirable.

CP’s Segmental Highlights

Freight revenues, accounting for 98.1% of the top line, increased 3% to $3.8 billion. The actual figure surpassed our estimate of $3.5 billion. CP’s Freight segment contains Grain (up 12%), Coal (down 6%), Potash (down 4%), Energy, chemicals and plastics (up 3%), Metals, minerals and consumer products (down 21%), Automotive (up 38%) and Intermodal (down 38%). Meanwhile, Fertilizers and Sulphur and Forest products declined marginally.

Other revenues increased 7.6% in the final quarter of 2024.

CP’s Liquidity

CP exited the fourth quarter with cash and cash equivalents of C$739 million compared with C$464 million in the fourth quarter of 2023. Long-term debt amounted to C$19.8 billion compared with C$19.4 billion at the end of the fourth quarter of 2023.

CP’s Outlook

Canadian Pacific Kansas City now expects 2025 RTMs to increase in the mid-single digits from the 2024 actuals on a combined basis. CP expects 2025 core adjusted combined diluted earnings per share to grow in in the 12-18% range from the 2024 actuals to C$4.25 per share.

Management expects capital expenditures to be C$2.9 billion for full-year 2.9. The company targets capital expenditures in the range of C$2.6 billion to C$2.8 billion per year across the combined network for the 2024-2028 period.

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

Currently, Canadian Pacific Kansas City has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Canadian Pacific Kansas City has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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This article originally published on Zacks Investment Research (zacks.com).

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