Benchmark maintained a Hold on Canadian Pacific Kansas City Limited (NYSE: CP) in the wake of the railway operator’s fourth-quarter 2025 results, leaving the stock’s near-term outlook unchanged. InvestingPro data point to a trailing price-to-earnings ratio of 21.5, a level the platform characterises as potentially undervalued when set against the company’s stated growth trajectory. At the same time, market estimates have shifted downward recently: 16 analysts have trimmed earnings forecasts for the coming period.
For the fourth quarter, Canadian Pacific Kansas City reported core adjusted earnings per share of C$1.33, missing analyst consensus by C$0.02. Reported revenue for the quarter reached C$3.92 billion, slightly below the C$3.95 billion analysts had expected. The company’s diluted earnings per share for the trailing twelve months stands at $3.29 USD.
Management issued initial guidance for 2026 with a focus on continued operating ratio improvement and a low-double digit increase in core adjusted diluted EPS. That outlook is premised on multiple drivers including a projected mid-single digit increase in revenue ton-miles for 2026. The company cites a record grain harvest, ongoing intermodal expansion and a series of company-specific projects and business wins as the sources of that ton-mile growth. Over the last twelve months the firm recorded revenue growth of 3.66%.
Executives expect volumes to strengthen as the year progresses but flagged that the first quarter is likely to be the weakest period. Management pointed to challenging year-over-year comparisons and recent severe winter weather as factors that will weigh on near-term volumes. Despite those headwinds, the company expects operating ratio improvement relative to the same quarter last year.
Margin improvement in 2026 is expected to be supported by more than C$200 million in additional synergy opportunities identified by the company. The firm also noted continuity in its shareholder return policy, having maintained dividend payments for 25 consecutive years and currently yielding 0.93%.
On the proposed transcontinental rail merger, CEO Keith Creel cautioned that the transaction is not a "fait accompli." He said that full disclosure of the benefits and potential harms will be necessary to determine whether the deal satisfies a public interest test and enhances competition.
InvestingPro’s financial health assessment assigns Canadian Pacific Kansas City a "GOOD" rating with an overall score of 2.5. Investors seeking further detail on the company’s financial position and prospects are directed to InvestingPro’s Pro Research Report and its supplementary ProTips for more in-depth analysis.
Analyst reactions to the results were mixed. Evercore ISI reduced its price target on the shares to $85.00 from $87.00 while maintaining an Outperform rating. The firm highlighted revenue growth of 1.3% as below expectations, attributing the shortfall to softer volumes and a weaker yield environment. By contrast, BMO Capital reiterated its Outperform rating and retained a price target of C$126.00, describing the fourth-quarter results as "largely in-line" with expectations.
The combination of a modest quarterly miss, revised analyst estimates and differentiated price-target actions illustrates the varied views on the company’s near-term earnings momentum and valuation. Management’s 2026 guidance centers on operational improvements and synergy capture to drive margin expansion and earnings growth, while the company cautions that the start of the year may face notable weather- and comparison-related constraints.
For investors tracking CP, the immediate considerations are the pace of volume recovery, the realization of stated synergies, and the regulatory and competitive assessment of any proposed merger. These factors will be central to evaluating whether the company’s longer-term targets for operating ratio and core adjusted EPS can be met.