Canadian Pacific Kansas City (CP) Up 1.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Canadian Pacific Kansas City (CP). Shares have added about 1.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Canadian Pacific Kansas City due for a pullback? 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 drivers.
Q3 Earnings Beat at Canadian Pacific Kansas City
Canadian Pacific Kansas City reported third-quarter 2023 earnings (excluding 6 cents from non-recurring items) per share of 69 cents (C$0.84), which beat the Zacks Consensus Estimate of 68 cents. Nonetheless, the bottom line decreased 10.4% year over year. However, quarterly revenues of $2,489.1 million (C$3,339 million) surpassed the Zacks Consensus Estimate of $2,487.4 million and improved 40.4% year over year.
Freight revenues, contributing 97.8% to the top line, rose 44.3% on a year-over-year basis. We suggested the metric to jump 49.2% from third-quarter 2022 actuals. CP’s freight segment contains Grain (up 53.5%), Coal (up 46.8%), Potash (down 21.8%), Forest products (up 82.6%), Energy, chemicals and plastics (up 78.6%), Metals, minerals and consumer products (up 84.9%), Automotive (up 139.6%), Fertilizers and Sulphur (up 12.3%), and Intermodal (up 1.6%).
In the reported quarter, total Freight revenues per revenue ton-miles gained 10% year over year. Total Freight revenues per carload declined 7% from a year ago.
On a reported basis, operating income was up 25.2%. Total operating expenses increased 58% year over year. Operating ratio (operating expenses as a percentage of revenues) improved 540 basis points to 64.9% from 59.5% in the year-ago quarter.
CP exited the third quarter with cash and cash equivalents of C$294 million compared with C$451 million in fourth-quarter 2022. Long-term debt amounted to C$21,762 million compared with C$18,141 million at the end of fourth-quarter 2022. Management expects adjusted earnings for 2023 to register flat to slightly positive year-over-year growth from 2022.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
Currently, Canadian Pacific Kansas City has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% 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 upward for the stock, and the magnitude of these revisions looks promising. 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.
Performance of an Industry Player
Canadian Pacific Kansas City belongs to the Zacks Transportation - Rail industry. Another stock from the same industry, Union Pacific (UNP), has gained 10.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Union Pacific reported revenues of $5.94 billion in the last reported quarter, representing a year-over-year change of -9.5%. EPS of $2.51 for the same period compares with $3.19 a year ago.
For the current quarter, Union Pacific is expected to post earnings of $2.52 per share, indicating a change of -5.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.4% over the last 30 days.
Union Pacific has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.
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