We recently published a list of 10 Best Railroad Stocks To Buy Now. In this article, we are going to take a look at where Canadian Pacific Kansas City Limited (NYSE:CP) stands against other best railroad stocks to buy now.
In February, the Association of American Railroads reported that intermodal volumes remained robust, rising 6.4% year-over-year. Weekly originations hit an all-time high in February, averaging 276,654 units. This growth was fueled by steady consumer spending and some importers ordering extra shipments ahead of possible tariffs. So far in 2025, intermodal volume is up 8.5%, and container volume has jumped 9.5%, setting a new record for this period. Moving forward, intermodal growth will depend on consumer demand, which is closely tied to job market strength and potential trade policy shifts.
However, American railroads experienced a 4.5% drop in carloads, moving 843,618 units in February. In the last five months, January had the first increase in carloads, but harsh winter weather, including flooding in the Northeast and freezing temperatures across most of the country, interrupted operations and obstructed freight handling. Without these weather challenges, rail volumes likely would have been higher. Coal being the largest commodity moved by rail continued its downward trend, with carloads dropping 8.2% in February and marking the 14th consecutive month of declines.
As the US ramps up its trade war under President Trump, freight railroads are preparing for the fallout. New tariffs on Mexico, Canada, China, and the EU are set to take effect soon, potentially disrupting a massive trade network. In 2024, American railroads handled $203.1 billion in cross-border trade with Canada and Mexico, being almost evenly split between the two, as reported by CNBC. The rail industry is a huge economic driver, generating $233.4 billion in output and supporting around 750,000 jobs in 2023. Texas is a major hub for freight rail employment since it handles most of the US to Mexico rail traffic. Railroads also reinvested $26.8 billion in infrastructure last year, mostly through private funding. As trade tensions rise, the industry remains focused on keeping goods moving and ensuring rail infrastructure stays strong.
Our Methodology
For this article, we focused on making a list of all railroad and railcar stocks that are publicly listed in the United States. Using Insider Monkey’s Q4 2024 hedge fund database, we examined the hedge fund sentiment for each stock and selected 10 most popular ones. The stocks are ranked in ascending order based on the number of hedge fund holders as of Q4 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A freight train making its way through a majestic mountain range, snow-capped peaks in the distance.
Canadian Pacific Kansas City Limited (NYSE:CP)
Number of Hedge Fund Holders: 74
Canadian Pacific Kansas City Limited (NYSE:CP) operates a transcontinental freight railway across Canada, the United States, and Mexico, transporting grains, coal, chemicals, automotive goods, and retail shipments. On February 27, the company announced that the Toronto Stock Exchange has authorized its plan to repurchase up to 37.35 million shares, which makes up around 4% of the company’s outstanding stock. The share repurchase program will be effective from March 3, 2025, to March 2, 2026.
In Q4, Canadian Pacific Kansas City Limited (NYSE:CP) experienced a 3% year-over-year revenue increase to $3.9 billion, with volumes up 2% and core EPS climbing 9% to $1.29. For the full year, the company generated $5.3 billion in operating cash flow and focused on paying down debt with its free cash flow after dividends. On January 29, 2025, it declared a quarterly dividend of $0.19 per share. The dividend will be distributed on April 28, 2025, to shareholders on record as of March 28.
According to Insider Monkey’s fourth quarter database, 74 hedge funds were bullish on Canadian Pacific Kansas City Limited (NYSE:CP), compared to 52 funds in the preceding quarter. Chris Hohn’s TCI Fund Management was the biggest stakeholder of the company, with nearly 55 million shares worth $4 billion.
Overall, CP ranks 2nd on our list of best railroad stocks to buy now. While we acknowledge the potential of CP as an investment, our conviction lies in the belief that certain AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CP but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.