Canadian Pacific Kansas City Limited Stock Price Forecast: A Promising 20% Annual Growth Forecast
Canadian Pacific Kansas City Limited (CPKC) operates a transcontinental freight railway network spanning Canada, the United States, and Mexico. The company transports a variety of bulk commodities such as grain, coal, potash, fertilizers, and sulphur, as well as merchandise freight including forest products, energy, chemicals, plastics, metals, minerals, consumer products, and automotive goods.
Financial Overview
- Revenue: For the fiscal Q2 2024, CPKC reported a revenue of CAD 3.60 billion, marking a 13.52% year-over-year increase.
- Net Income: The net income for the same period was CAD 905 million, which represents a 31.65% decrease from the previous year.
- Earnings Per Share (EPS): The EPS stood at CAD 1.05, reflecting a 26.51% increase.
Stock Performance
- Current Stock Price: As of October 8, 2024, CPKC’s stock price was USD 80.61.
- 52-Week Range: The stock has traded between USD 68.92 and USD 91.58 over the past year.
- Market Cap: The market capitalization is approximately USD 76.433 billion.
- Dividend: The company offers a forward dividend yield of 0.69%, with the most recent ex-dividend date being September 27, 2024.
CPKC’s stock performance has been relatively stable, with a 1-year return of 11.41%. However, it has underperformed compared to the S&P/TSX Composite index, which saw a 25.08% return over the same period.
Canadian Pacific Kansas City Investment Insight
We view the merger of the two railway companies very positively. A significant increase in revenue is immediately evident. So far, we see that Net Margin has slightly decreased, while Gross Margin has remained almost unchanged, though it has also decreased. However, there is a particularly significant change in Administrative and General expenses. Their share in Gross Profit has decreased substantially, which boosted Net Profit.
The increased Total Assets have not lost their efficiency, and the Return on Assets (ROA) rose to 5.10% over the financial year. This is a good return for a company of this size. We expect to see more of the merger’s potential in the future, although market participants are already noticing it now.
Price forecast
| MIN/MAX | 2024 | 2025 | 2026 | 2027 | 2028 |
|---|---|---|---|---|---|
| MIN | 143.37 | 146.70 | 150.42 | 154.24 | 158.16 |
| MAX | 190.11 | 194.94 | 199.88 | 204.96 | 210.16 |
Dividend Policy
Canadian Pacific Kansas City Limited has a consistent dividend policy aimed at providing shareholders with a return on their investment. Here are the key points:
- Quarterly Dividends: CPKC declares dividends on a quarterly basis. For example, the most recent dividend declared was $0.19 per share, payable on October 28, 2024.
- Dividend Yield: The current dividend yield for CPKC is approximately 0.69% – less than the average of S&P 500 stocks.
- Annual Dividend: The annual dividend for CPKC shares is around $0.76.
The Board of Directors considers various factors when determining the dividend amount, including the company’s financial condition, cash requirements, and future prospects. While the Board aims to maintain a stable dividend, it is under no obligation to declare dividends and may adjust the amount based on the company’s performance and market conditions.
Conclusion
The merger of Canadian Pacific and Kansas City Southern has created a robust transcontinental railway network, significantly enhancing operational efficiencies and revenue potential. Despite a slight decrease in Net Margin, the overall financial health of the company remains strong, with notable improvements in administrative and general expenses.
The Return on Assets (ROA) has risen to 5.10%, indicating efficient asset utilization. Given these positive indicators and the strategic advantages of the merger, we forecast that CPKC’s stock price could grow by over 20% annually in the coming years. Market participants are already recognizing the merger’s potential, and we expect this trend to continue.