Canadian Pacific Kansas City Limited (CP): A Bull Case Theory 

We came across a bullish thesis on Canadian Pacific Kansas City Limited on Beat the TSX (BTSX-20)’s Substack by Beat the TSX-27 Strategy.. In this article, we will summarize the bulls’ thesis on CP. Canadian Pacific Kansas City Limited’s share was trading at $72.57 as of November 28th. CP’s trailing and forward P/E were 22.16 and 19.12 respectively according to Yahoo Finance.

Canadian Pacific Kansas City Limited, together with its subsidiaries, owns and operates a transcontinental freight railway in Canada, the United States, and Mexico. CPKC reported a steady Q3 2025 with EPS of $1.10, slightly ahead of last year’s $1.09, and revenue up 3% year-over-year, supported by 5% volume growth. Operating efficiency improved notably, with the operating ratio declining 220 basis points to 60.7%, even after absorbing a one-time derailment cost of 100 bps. Management reaffirmed 2025 EPS growth guidance of 10–14%, though Q4 volumes are currently down about 3% year-over-year.

A strong North American grain harvest, CPKC’s largest segment contributing over 20% of revenue, is expected to partially offset the volume shortfall in the final months of the year. Shareholder returns remain active, with over 90% of a 4% NCIB completed, although leverage has increased to 3.2× net debt-to-EBITDA, highlighting a trade-off between aggressive buybacks and balance sheet conservatism. While the company continues to execute well operationally, EPS growth has yet to hit the 15% CAGR target for 2024–2028, reflecting a challenging freight environment.

Investor focus has been distracted by U.S. rail M&A chatter, which minimally impacts CPKC’s north-south routes. Valuation remains elevated, priced for perfection rather than opportunity, leading the team to prefer entry under a P/E of 20, ideally in the $90 range. CPKC’s long-term competitive advantage, credible management, irreplaceable infrastructure, and pricing power make it a high-quality operator, but near-term volume headwinds suggest patience is warranted. The recommendation is to hold existing positions while waiting for a more attractive entry point for new investments, emphasizing that the stock is best acquired at the right price rather than at any premium valuation.

Previously we covered a bullish thesis on Union Pacific Corporation (UNP) by Peter Thomason in May 2025, which highlighted the company’s durable competitive advantages, high barriers to entry, and predictable cash flows in the North American railroad industry. The stock has appreciated approximately 6.91% since coverage. The thesis still stands. Beat the TSX-27 Strategy shares a similar perspective but focuses on near-term operational metrics, EPS guidance, and leverage for Canadian Pacific Kansas City Limited.

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Disclosure: None.