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View the full Nov 10, 2026 version

Price: CA$132.62
Discount category: Far above intrinsic value
Next earnings: 2027-01-27
Next earnings is estimate: Yes
Company name: Canadian Pacific Kansas City
Sector: Railroads
About: Canadian Pacific Kansas City (CPKC) is the only single-line railway that links Canada, the United States and Mexico. Canadian Pacific took control of Kansas City Southern (KCS) on April 14, 2023. The network has about 20,000 route miles and reaches ports from Vancouver to Atlantic Canada, the Gulf Coast and Lázaro Cárdenas in Mexico, and the company has about 20,000 employees. In the first nine months of 2026, grain gave C$2.70 billion of the C$11.86 billion of freight revenues, energy, chemicals and plastics C$2.24 billion and intermodal C$2.23 billion. It also carries coal, potash, fertilizers, forest products, metals, minerals, consumer products and automotive products. Revenues were C$15.1 billion in 2025. The head office is in Calgary, Alberta, and Keith Creel is its president and chief executive officer.
Thesis: CPKC trades at a premium because investors pay for its unique network across Canada, the United States and Mexico and for the growth that the combination with KCS can bring. Revenues rose 15% in Q3 2026, volumes in revenue ton-miles rose 6% and core adjusted diluted EPS rose 16% to C$1.28. For 2026, the company guides low double-digit growth in core adjusted diluted EPS from C$4.61 in 2025; the first nine months gave C$3.57, against C$3.28 a year earlier. But the core adjusted operating ratio rose to 61.9% in Q3 2026 from 60.7%, mostly because of higher fuel prices, and cross-border freight depends on tariffs and trade rules between the three countries. For the premium to be earned, three things must be true. Volume growth must continue in grain, intermodal and merchandise. The operating ratio must improve again when fuel costs fall. Core adjusted EPS must keep growing at about a low double-digit rate after 2026, with help from buybacks. The Q4 2026 report with the 2027 guidance, expected in late January 2027, is the next test. If cross-border trade weakens, the premium can shrink.
Risks: Much of the freight crosses the borders between Canada, the United States and Mexico. Tariffs or other trade restrictions can lower volumes, as in Q1 2026, when revenues fell 2%. Fuel is a large cost. Fuel expense rose to C$667 million in Q3 2026 from C$415 million, and higher fuel prices raised the core adjusted operating ratio by 190 basis points. The U.S. Surface Transportation Board reviews the proposed merger of Union Pacific and Norfolk Southern. A combined railway can compete harder for traffic to and from CPKC's network, and CPKC spent C$44 million on advisory costs for its analysis and advocacy in the review in the first nine months of 2026. CPKC bought back shares for C$3.43 billion in the first nine months of 2026, partly with commercial paper and new notes. Adjusted net debt was 3.2 times adjusted EBITDA at September 30, 2026. Accidents, severe weather and labor disputes can stop trains and raise costs. The FRA-reportable train accident frequency rose to 0.93 in Q1 2026 from 0.38 a year earlier.
Balance sheet: Cash: CA$399M Debt: CA$25.8B Net debt: CA$25.4B Net debt / EBITDA: 3.2× (medium) Interest cover: 6.0× Debt due within 12 months: CA$3.6B CPKC funds itself with unsecured notes, commercial paper and equity. At September 30, 2026, total debt was C$25.85 billion: C$22.23 billion of long-term debt and C$3.61 billion due within one year, which includes US$1,535 million (C$2,179 million) of commercial paper. Cash was C$399 million. In the first nine months of 2026, CPKC issued US$600 million of 4.00% notes due 2029 and US$600 million of 5.50% notes due 2056, and on October 6, 2026, it issued C$1.8 billion of notes due 2030 to 2056. The US$2.2 billion revolving credit facility, in two tranches that mature in June 2028 and June 2031, was undrawn and backs the commercial paper programs. The company states adjusted net debt of C$26.42 billion, 3.2 times adjusted EBITDA for the 12 months to September 30, 2026. Interest cover is operating income divided by net interest expense for the first nine months of 2026 (C$4,217 million against C$704 million). Total equity was C$46.76 billion. In the first nine months of 2026, CPKC bought back 28.1 million shares for C$3.43 billion and raised the quarterly dividend to C$0.268 per share. There were 869,554,740 shares outstanding on October 27, 2026. As of 2026-09-30.
Checkpoints: Oct 28, 2026: Q3 2026 results and 2026 guidance. Passed. Watch: Core adjusted EPS growth near the guidance and volume growth pass; a cut to guidance fails. Outcome: Core adjusted diluted EPS rose 16% to C$1.28, volumes rose 6%, and the company said that it remains on track for its 2026 commitments. Jan 27, 2027 (estimate): Q4 2026 results and 2027 guidance. Pending. Watch: 2026 core adjusted EPS growth of about 10% or more and 2027 guidance for more growth pass; lower guidance fails. Apr 2027 (estimate): Q1 2027 results: operating ratio. Pending. Watch: A core adjusted operating ratio below the 63.0% of Q1 2026 and volume growth pass; a higher ratio fails.
Recent events: 2026-10-28: CPKC reported Q3 2026 results. Revenues rose 15% to C$4.2 billion, and revenue ton-miles rose 6%. Diluted EPS was C$1.04 and core adjusted diluted EPS rose 16% to C$1.28. The reported operating ratio rose to 64.8% from 63.5%, and higher fuel prices added 170 basis points. The company said that it remains on track to meet its commitments for 2026. It declared a quarterly dividend of C$0.268 per share, payable on January 25, 2027. 2026-10-06: CPKC issued C$1.8 billion of notes: C$500 million of 4.20% notes due 2030, C$550 million of 4.60% notes due 2033, C$300 million of 4.90% notes due 2037 and C$450 million of 5.40% notes due 2056. 2026-07-29: CPKC reported Q2 2026 results. Revenues rose 13% to C$4.2 billion, and revenue ton-miles rose 4%. Diluted EPS was C$1.15, against C$1.33, because Q2 2025 included a gain on the sale of the stake in the Panama Canal Railway Company. Core adjusted diluted EPS rose 13% to C$1.27. 2026-07-06: CPKC extended its US$2.2 billion revolving credit facility: the US$1.1 billion two-year tranche now matures on June 25, 2028, and the US$1.1 billion five-year tranche on June 25, 2031. 2026-04-29: CPKC reported Q1 2026 results. Revenues fell 2% to C$3.7 billion, while revenue ton-miles rose 2%. Diluted EPS was C$0.94, and core adjusted diluted EPS fell 2% to C$1.04, with headwinds of about 4 cents from foreign exchange and 3 cents from fuel prices. On April 28, 2026, the board raised the quarterly dividend by 17.5% to C$0.268 per share. 2026-01-28: CPKC reported 2025 results. Revenues rose 4% to C$15.1 billion, diluted EPS was C$4.51 and core adjusted diluted EPS rose 8% to C$4.61. For 2026, it guided low double-digit growth in core adjusted diluted EPS and mid-single digit growth in revenue ton-miles. It announced a normal course issuer bid to buy back up to 44.9 million shares from February 2, 2026 to February 1, 2027.