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

We came across a bullish thesis on Canadian Pacific Kansas City Limited on Beat the TSX (BTSX-20)’s Substack by Beat the TSX-27 Strategy. In this article, we will summarize the bulls’ thesis on CP. Canadian Pacific Kansas City Limited's share was trading at $73.43 as of September 29th. CP’s trailing and forward P/E were 22.75 and 18.80 respectively according to Yahoo Finance.

Canadian Pacific Kansas City (CPKC) delivered a solid Q2 2025 performance, reporting EPS of $1.12 versus $1.05 in Q2 2024, driven by a 3% year-over-year revenue increase. Revenue growth was underpinned by a 7% rise in volumes and favorable pricing, partially offset by lower fuel surcharge revenue and the removal of the carbon tax. The company also improved its operating ratio by 110 basis points to 60.7%, reflecting ongoing cost efficiencies. One-time operational charges in the southern U.S., related to system cutover issues, modestly reduced EPS by $0.03–$0.04 but are largely resolved, leaving the company well-positioned for H2 2025.

CPKC reaffirmed full-year EPS guidance of 10–14% growth, supported by strong visibility across bulk, steel, auto, and intermodal traffic, despite macroeconomic uncertainties such as tariffs, currency fluctuations, and labor conditions. The company has also demonstrated shareholder-friendly capital discipline, buying back 45% of a 4% NCIB. Strategic advantages, including its North–South network and resilient infrastructure, remain intact and largely insulated from ongoing U.S. transcontinental rail mergers.

However, the stock’s premium valuation relative to U.S. rail peers and uncertainty surrounding CEO Keith Creel’s 2026 contract renewal may weigh on near-term performance. While long-term growth prospects and cost discipline remain robust, the current market pricing leaves limited margin of safety. CPKC offers a modest dividend yield (~0.7–0.8%) and enduring pricing power that can withstand inflationary pressures, but multiple expansion may be constrained as investor capital flows elsewhere.

Overall, CPKC represents a structurally strong franchise with long-term moat characteristics, yet investors are advised to hold existing positions and wait for a more attractive entry point before initiating new exposure, reflecting a prudent risk/reward stance.

Previously we covered a bullish thesis on Union Pacific Corporation (UNP) by Peter Thomason in May 2025, which highlighted the company’s durable competitive advantages, protected market position, and predictable cash flows. The company's stock price has appreciated approximately by 8.91% since our coverage. The thesis still stands. Beat the TSX-27 Strategy shares a similar view but emphasizes near-term execution, volume growth, and cost efficiency at Canadian Pacific Kansas City (CPKC).

Canadian Pacific Kansas City Limited is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 60 hedge fund portfolios held CP at the end of the second quarter which was 65 in the previous quarter. While we acknowledge the potential of CP as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.