BMO Capital has reiterated an Outperform rating on Canadian Pacific Kansas City Ltd with a price objective of C$126.00. The railway is trading at $73.45 and carries a market capitalization of $66.2 billion. According to analysis cited by the firm, the stock is considered undervalued at current levels.
The upgrade affirmation follows Canadian Pacific Kansas City’s fourth-quarter 2025 results, which BMO described as "largely in-line" with expectations. BMO analyst Fadi Chamoun highlighted the company’s stated target of double-digit earnings-per-share growth in 2026, calling that target "achievable" and potentially "even conservative."
Chamoun and his team outlined several specific drivers they expect to underpin that EPS expansion:
- Projected mid-single-digit volume growth.
- An anticipated contribution to EPS of more than 4% from the company’s share buyback program.
- Ongoing strong productivity momentum.
- The benefit of lapping tariff headwinds and IT disruptions that occurred in the second quarter of 2025.
BMO also emphasized management’s plan to reduce capital expenditures by 15%. The firm said that lower capex should help expand free cash flow and improve returns on invested capital, reinforcing its view that the stock offers "one of the best risk/reward profiles in the Transport sector." BMO further pointed to the company’s robust gross profit margin of 53.4% and a PEG ratio of 0.95 as evidence that valuation looks favorable versus projected growth.
Not all recent data has been uniformly positive. For the fourth quarter of 2025, Canadian Pacific Kansas City reported adjusted earnings per share of C$1.33, below the average Street estimate of C$1.35 and Evercore ISI’s forecast of C$1.38. Revenue for the quarter came in at C$3.92 billion, short of the anticipated C$3.95 billion, with the shortfall attributed to lower-than-expected volumes and a softer yield environment.
In reaction to those results, Evercore ISI trimmed its price target for Canadian Pacific Kansas City from $87.00 to $85.00 but kept an Outperform rating in place. Those revisions underscore the recent operational challenges the railroad operator has faced in meeting consensus financial projections.
Overall, BMO’s view balances the near-term misses with several structural and financial levers the company is deploying - buybacks, productivity gains, capex reduction and the expected recovery in volumes and yields - which the firm believes support a stronger EPS trajectory into 2026.
Sector impact: The developments affect the transport sector broadly, with implications for investors focused on industrial throughput, freight pricing, and capital allocation in railroads. Investors assessing unit economics, margin resilience and return on invested capital in the transport and logistics space will find the company’s mix of margin strength and buyback support particularly relevant.