CP Stock Forecast & Price Target

Canadian Pacific Kansas City (CPKC) has demonstrated solid financial performance with a 2.7% year-over-year revenue growth, supported by a 6.5% increase in revenue ton-miles, despite a slight yield compression of 3.6%. The company's leverage ratio improved modestly to 3.0x, alongside a significant rise in free cash flow to $605 million, even as it executed $1.4 billion in stock buybacks. Furthermore, the positive outlook is bolstered by strong grain volume growth of 11% year-over-year and significant advancements in domestic intermodal, particularly through CPKC's MMX service which saw volumes rise by 40% year-over-year.

Canadian Pacific Kansas City's operating income increased by 5.4% year-over-year, but this performance fell short of expectations by approximately 2.5%, attributed to yield headwinds and ongoing integration challenges from the Kansas City Southern merger. The operating ratio of 60.7% improved year-over-year by 110 basis points; however, it still represented a slight miss against estimates, suggesting operational inefficiencies that may become more pronounced if integration issues persist. Additionally, a decline in volumes for metals, minerals, and consumer products, alongside a negative impact from tariffs on cross-border steel, raises concerns about revenue stability and future performance.