Canadian Pacific Continues to Grapple With Rising Expenses, Debt Woes

Canadian Pacific Kansas City Limited CP is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.

Let’s delve deeper.

Key Risks to Watch

Southward Earnings Estimate Revision: The Zacks Consensus Estimate for first-quarter 2026 earnings has moved 2.25% south in the past 60 days. For 2025 and 2026, the consensus mark for earnings has been revised 2.92% and 3.78% downward, respectively, in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

Dim Price Performance:  The company’s price trend reveals that its shares have lost 9.7% over the past year against the Transportation - Rail industry’s 3.3% growth.

CP Stock Six-Month Price Comparison

Weak Zacks Rank and Style Score:Canadian Pacific currently carries a Zacks Rank #4 (Sell). The company’s current Value Score of D shows its unattractiveness.

Other Headwinds: CP is mired in significant challenges, dampening the company’s prospects. The increased expenses are weighing on the company’s bottom line. In the first nine months of 2025, the total operating expenses grew 1.5% year over year, with labor costs (expenses on compensation and benefits) up 0.7% year over year, despite fuel expenses down 3% year over year.

Canadian Pacific is a highly leveraged company. CP exited the third quarter of 2025 with cash and cash equivalents of C$411 million compared with the long-term debt of C$21.5 billion. The unfavorable reading indicates that the company does not have enough cash to meet its short-term obligations.

Moreover, companies like CP are navigating a volatile macro environment marked by economic uncertainty, shifting tariff regulations and geopolitical tensions.

Bearish Industry Rank: The industry to which Canadian Pacific belongs currently has a Zacks Industry Rank of 175 (out of 243). Such an unfavorable rank places it in the bottom 27% of Zacks Industries. Studies show that 50% of a stock’s price movement is directly related to the performance of the industry group it belongs to.

A mediocre stock within a strong group is likely to outperform a robust stock in a weak industry. Hence, reckoning the industry’s performance becomes imperative.

Stocks to Consider

Investors interested in the Transportation sector may also consider LATAM Airlines Group LTM and SkyWest, Inc. SKYW. Each stock presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

LTM has an expected earnings growth rate of 52.63% for the current year. The company has a solid earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters, and met in the remaining one, delivering an average beat of 29.84%. The Zacks Consensus Estimate for LTM’s 2025 earnings has moved 5.34% north in the past 60 days.

SkyWest has an expected earnings growth rate of 32.95% for the current year. It has an impressive earnings surprise history. The company’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, delivering an average beat of 21.24%. The Zacks Consensus Estimate for SkyWest’s 2025 earnings has moved 3.82% north in the past 60 days.

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This article originally published on Zacks Investment Research (zacks.com).

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