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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.