Why Is Canadian Pacific Kansas City (CP) Up 3.7% Since Last Earnings Report?

Core Viewpoint - Canadian Pacific Kansas City (CP) reported disappointing Q2 2025 earnings, with both earnings and revenues missing estimates, leading to questions about future performance [2][3]. Financial Performance - Q2 earnings per share were 81 cents, missing the Zacks Consensus Estimate by 1.2%, but improved 5.2% year-over-year [3]. - Operating revenues were $2.67 billion, falling short of estimates by 4.3%, yet showing a 1.5% year-over-year increase [3]. - Total Freight revenues per revenue ton miles decreased by 4% year-over-year, and revenues per carload declined by 3% year-over-year [3]. Operating Metrics - Operating income increased by 6%, while total operating expenses grew by 0.9% year-over-year [4]. - The operating ratio improved, falling 110 basis points to 63.7% from 64.8% in the previous year [4]. Segment Performance - Freight revenues, which account for 98.1% of total revenues, increased by 2.7% [5]. - Notable segment changes included Grain (up 12%), Coal (up 8%), and significant declines in Automotive (down 28%) and Metals, minerals and consumer products (down 20%) [5]. Liquidity Position - At the end of Q2, cash and cash equivalents stood at C$799 million, up from C$739 million at the end of Q4 2024 [6]. - Long-term debt increased to C$21.23 billion from C$19.8 billion at the end of Q4 2024 [6]. Future Outlook - The company expects core adjusted combined diluted earnings per share to grow by 10-14% in 2025, targeting C$4.25 per share [7]. - Anticipated capital expenditures for 2025 are C$2.9 billion, with a projected effective tax rate of 24.5% [7]. - Despite ongoing tariff and trade policy uncertainties, the company expects mid-single-digit growth in revenue ton miles (RTMs) from 2024 [7]. Estimate Trends - Estimates for the company have trended downward over the past month, indicating a negative shift in expectations [8][11]. - The stock currently holds a Zacks Rank 3 (Hold), suggesting an expectation of in-line returns in the coming months [11]. Industry Comparison - Canadian Pacific Kansas City is part of the Zacks Transportation - Rail industry, where Union Pacific (UNP) reported a revenue increase of 2.4% year-over-year, with Q2 revenues of $6.15 billion [12]. - Union Pacific's expected earnings for the current quarter indicate an 8% year-over-year increase, with a Zacks Rank 3 (Hold) as well [13].