Evercore ISI has trimmed its price target on Canadian Pacific Kansas City Limited to $85.00 from $87.00 while retaining an Outperform recommendation on the shares. The firm's update follows the railroad operator's fourth-quarter 2025 report, which produced mixed signals for investors.
On the top-line and bottom-line math, Canadian Pacific reported fourth-quarter adjusted earnings per share of C$1.33, below Evercore's C$1.38 projection and the average Street estimate of C$1.35. Revenue growth was reported at 1.3%, a pace that fell short of expectations; Evercore attributed the shortfall to weaker-than-anticipated volumes and a softer yield environment.
Despite those misses, the company improved operating efficiency in the quarter. Management recorded a 120 basis point improvement in the operating ratio, which narrowed to 55.9% in the period, built on an already strong 53.4% gross profit margin. That operating leverage is a notable counterweight to the revenue pressures documented in the quarter.
For 2026, Canadian Pacific issued initial guidance that calls for mid-single-digit volume growth and low-double-digit earnings-per-share growth. Evercore noted that EPS expansion in the year ahead is likely to be aided by shareholder returns, after the board authorized repurchases of another 5% of the float for 2026. InvestingPro data cited by the research note indicates management has been actively buying back stock while the company also maintains a 25-year streak of consistent dividend payments, with the dividend currently yielding 0.93%.
Evercore said it expects a difficult start to 2026. The firm projects that the first quarter will face ongoing volume headwinds because of softer end-market demand and challenging year-over-year comparisons with Q1 2025. In its Q1 outlook, Evercore models flat revenue growth versus the prior year and only a modest operating ratio improvement of about 40 basis points.
Reflecting those near-term headwinds, Evercore reduced its earnings estimates for Canadian Pacific. The firm now expects adjusted earnings of C$5.20 per share for 2026, down from a prior C$5.27 estimate, and C$5.92 for 2027, revised down from C$5.98. Despite the cuts, the research house left its Outperform rating intact on the view that performance should accelerate later in the year.
Market metrics cited in the note show the stock trading at $71.78 at the time of the report. InvestingPro's Fair Value assessment suggests CP is trading below its fair value, and analyst price targets on the name range from $75.25 to $97.43. The shares trade at a price-to-earnings ratio of 21.2, are characterized by low price volatility, and carry a "GOOD" overall financial health rating in the InvestingPro profile.
Additional Q4 detail provided in related reporting shows the company announced the quarter's earnings on January 28. That release listed EPS of $1.33, missing a reported consensus forecast of $1.36. Quarterly revenue was reported at 3.92 billion CAD, versus an anticipated 3.95 billion CAD, representing a -2.21% surprise on EPS and a small revenue shortfall. Despite those results, the stock saw a modest uptick in aftermarket trading following the announcement.
The analyst landscape remains broadly favorable toward the railroad; InvestingPro data referenced in the note shows an overall analyst recommendation rating of 1.6. Investors evaluating valuation and outlook have access to InvestingPro's tools, including a Fair Value calculator that the service states relies on a combination of 17 industry valuation models. The platform also highlights additional research material and ProTips available through its subscription service.
In sum, Evercore's update tightened the firm's near-term earnings view and trimmed the price target, but the firm continues to favor the stock on the expectation that operating leverage, share repurchases and management guidance could support improved results later in 2026.