It has been about a month since the last earnings report for Canadian Pacific Kansas City (CP). Shares have lost about 4.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Canadian Pacific Kansas City due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Q3 Earnings Miss at CP

Canadian Pacific Kansas City reported third-quarter 2024 earnings (excluding 7 cents from non-recurring items) of 73 cents per share, which marginally missed the Zacks Consensus Estimate of 74 cents. However, the bottom line improved 5.8% on a year-over-year basis. Results were aided by strong operational efficiency.

Operating revenues of $2.60 billion lagged the Zacks Consensus Estimate of $2.67 billion. However, the top line improved by 4.5% on a year-over-year basis due to synergies and robust operational and safety performances.

In the reported quarter, total freight revenues per revenue ton miles increased 1.5% year over year. Total Freight revenues per carload increased 9.6% year over year.

On a reported basis, the operating income was up 2.6%. Total operating expenses surged 8.3% year over year due to escalated labor costs. The reported operating ratio (operating expenses as a percentage of revenues) improved 120 basis points to 66.1% from 64.9% in the year-ago quarter. A lower value of the metric is more desirable.

CP’s Segmental Highlights

Freight revenues, accounting for 97.5% of the top line, increased 6% to $3.46 billion. The actual figure missed our estimate of $3.51 billion. CP’s Freight segment contains Grain (up 11.3%), Coal (up 8.3%), Potash (up 8.3%), Energy, chemicals and plastics (up 10.7%), Metals, minerals and consumer products (down 2.6%), Automotive (up 25.2%) and Intermodal (down 4%). Meanwhile, Fertilizers and Sulphur and Forest products remained flat at $91 million and $198 million.

Other revenues increased 20.6% to $88 million in the third quarter of 2024.

CP’s Liquidity

CP exited the third quarter with cash and cash equivalents of C$463 million compared with C$464 million in the fourth quarter of 2023. Long-term debt amounted to C$18.71 billion compared with C$19.35 billion at the end of the fourth quarter of 2023.

CP’s Outlook

Canadian Pacific Kansas City now expects RTMs to increase in the mid-single digits from the 2023 actuals on a combined basis. CP continues to expect 2024 core adjusted combined diluted earnings per share to grow in double digits from the 2023 actuals to $3.84 per share.