Canadian Pacific Kansas City Limited (CP): A Bull Case Theory

We came crossed a bullish thesis connected Canadian Pacific Kansas City Limited connected Beat the TSX (BTSX-20)’s Substack by Beat the TSX-27 Strategy.. In this article, we volition summarize the bulls’ thesis connected CP. Canadian Pacific Kansas City Limited's stock was trading astatine $72.57 arsenic of November 28th. CP’s trailing and guardant P/E were 22.16 and 19.12 respectively according to Yahoo Finance.

Copyright: khunaspix / 123RF Stock Photo

Canadian Pacific Kansas City Limited, unneurotic with its subsidiaries, owns and operates a transcontinental freight railway successful Canada, the United States, and Mexico. CPKC reported a dependable Q3 2025 with EPS of $1.10, somewhat up of past year’s $1.09, and gross up 3% year-over-year, supported by 5% measurement growth. Operating ratio improved notably, with the operating ratio declining 220 ground points to 60.7%, adjacent aft absorbing a one-time derailment outgo of 100 bps. Management reaffirmed 2025 EPS maturation guidance of 10–14%, though Q4 volumes are presently down astir 3% year-over-year.

A beardown North American atom harvest, CPKC’s largest conception contributing implicit 20% of revenue, is expected to partially offset the measurement shortfall successful the last months of the year. Shareholder returns stay active, with implicit 90% of a 4% NCIB completed, though leverage has accrued to 3.2× nett debt-to-EBITDA, highlighting a trade-off betwixt assertive buybacks and equilibrium expanse conservatism. While the institution continues to execute good operationally, EPS maturation has yet to deed the 15% CAGR people for 2024–2028, reflecting a challenging freight environment.

Investor absorption has been distracted by U.S. obstruction M&A chatter, which minimally impacts CPKC’s north-south routes. Valuation remains elevated, priced for perfection alternatively than opportunity, starring the squad to similar introduction nether a P/E of 20, ideally successful the $90 range. CPKC’s semipermanent competitory advantage, credible management, irreplaceable infrastructure, and pricing powerfulness marque it a high-quality operator, but near-term measurement headwinds suggest patience is warranted. The proposal is to clasp existing positions portion waiting for a much charismatic introduction constituent for caller investments, emphasizing that the banal is champion acquired astatine the close terms alternatively than astatine immoderate premium valuation.

Previously we covered a bullish thesis connected Union Pacific Corporation (UNP) by Peter Thomason successful May 2025, which highlighted the company’s durable competitory advantages, precocious barriers to entry, and predictable currency flows successful the North American railroad industry. The banal has appreciated astir 6.91% since coverage. The thesis inactive stands. Beat the TSX-27 Strategy shares a akin position but focuses connected near-term operational metrics, EPS guidance, and leverage for Canadian Pacific Kansas City Limited.