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Here's Why Investors Should Bet on Canadian Pacific Stock Right Now

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Canadian Pacific Kansas City’s (CP - Free Report) bottom line is bolstered by increased operational efficiency. Cost-cutting initiatives and a shareholder-friendly approach bode well for the company. Owing to these tailwinds, CP shares have performed impressively on the bourse. If you have not taken advantage of its share price appreciation yet, it’s time to do so.

Let’s delve deeper.

Factors Favoring CP Stock

Robust Price Performance: A look at the company’s price trend reveals that its shares have risen 2.7% year to date, surpassing the industry’s 1.7% decline.

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Northward Estimate Revisions: The Zacks Consensus Estimate for earnings per share has been revised upward by 0.3% over the past 60 days for the current year. For the upcoming year, the consensus mark for earnings per share has moved 0.3% north in the same time frame. The favorable estimate revisions indicate brokers’ confidence in the stock.

Positive Earnings Surprise History: Canadian Pacific has an encouraging earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 2.2%.

Solid Zacks Rank: CP currently carries a Zacks Rank #2 (Buy).

Bullish Industry Rank: The industry to which Canadian Pacific belongs currently has a Zacks Industry Rank of 51 (out of 251). Such a favorable rank places it in the Top 20% of Zacks Industries.Studies show that 50% of a stock price movement is directly related to the performance of the industry group it belongs to.

A mediocre stock within a strong group is likely to outclass a robust stock in a weak industry. Reckoning the industry’s performance becomes imperative.

Growth Drivers: Canadian Pacific's proactive cost-cutting initiatives are commendable, resulting in robust operational efficiency in the second quarter of 2024. The company achieved a 9% decrease in average terminal dwell time and a 6% increase in average train speed, demonstrating improved processing and network fluidity.

Moreover, In the same period, locomotive productivity rose by 10%, while fuel efficiency enhanced by 2%, highlighting CP's commitment to operational excellence and sustainability. Labor costs, comprising 26.2% of total operating expenses, also fell by 7% year over year to $612 million, contributing to the company's strong performance.

CP’s commitment to reward its shareholders through dividends amid uncertainties reflects its financial confidence. With dividend payouts increasing from C$507 million in 2021 to C$707 million in 2022 and 2023, its financial growth and proactive approach to rewarding shareholders are underscored. In the second quarter of 2024, the company paid out a quarterly dividend of 19 cents per share to its shareholders.

Other Stocks to Consider

Some other top-ranked stocks for investors’ consideration in the Zacks Transportation sector include C.H. Robinson Worldwide (CHRW - Free Report) and Westinghouse Air Brake Technologies (WAB - Free Report) .

C.H. Robinson Worldwide currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.  CHRW has an expected earnings growth rate of 25.2% for the current year.

The company has an impressive earnings surprise history. Its earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, delivering an average surprise of 7.3%. Shares of CHRW have risen 23.6% in the past year.

WAB carries a Zacks Rank #2 at present and has an expected earnings growth rate of 26% for the current year.

The company has an encouraging track record with respect to the earnings surprise, having surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missing once. The average beat is 11.8%. Shares of WAB have surged 76.1% in the past year.

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