Canadian Pacific Kansas City Ltd. (CP - Free Report) is currently mired in multiple headwinds, which we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 5.9% downward over the past 60 days. For the current year, the consensus mark has moved 10.4% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Bearish Industry Rank: The industry, to which CP belongs, currently has a Zacks Industry Rank of 210 (of 250 plus groups). Such an unfavorable rank places CP in the bottom 17% of the 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. Therefore, reckoning the industry’s performance becomes imperative.
Weak Zacks Rank and Style Score: Canadian Pacific Kansas City currently carries a Zacks Rank #4 (Sell). Moreover, CP’s current Momentum Style Score of D shows its short-term unattractiveness.
Other Headwinds: The railroad operator’s total operating expenses have increased 9% year over year in 2021. This was mainly due to the 31% escalation in fuel costs last year. With fuel costs rising as oil prices move north, operating expenses were high (up 15%) in 2022 as well.
Fuel costs jumped 19.4% and 7.3% year over year in first-quarter and second-quarter 2023, respectively. The metric is likely to remain high in third-quarter 2023 as well.
The company’s return-on-equity (ROE) is pegged at 8.9%, below the industry’s level of 24.7%. Lower ROE indicates less efficiency in utilizing the equity capital. The unimpressive reading undercuts CP’s growth potential.
Key Picks
Some better-ranked stocks for investors interested in the Zacks Transportation sector are GATX Corp. (GATX - Free Report) and Kirby Corp. (KEX - Free Report) .
GATX, which presently carries a Zacks Rank #2 (Buy), is aided by gradual improvement in the North American railcar leasing market. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For third-quarter and full-year 2023, GATX’s earnings are estimated to register 36.6% and 14.3% climb, respectively, on a year-over-year basis.
Kirby currently carries a Zacks Rank #2. Strong segmental performances are boosting Kirby’s top line.
For third-quarter and full-year 2023, KEX’s earnings are suggested to record 58.5% and 76.2% improvement, respectively, on a year-over-year basis.
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Canadian Pacific Kansas City Ltd. (CP - Free Report) is currently mired in multiple headwinds, which we believe, have made it an unimpressive investment option.
Let’s delve deeper.
Southward Earnings Estimate Revisions: The Zacks Consensus Estimate for current-quarter earnings has been revised 5.9% downward over the past 60 days. For the current year, the consensus mark has moved 10.4% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.
Bearish Industry Rank: The industry, to which CP belongs, currently has a Zacks Industry Rank of 210 (of 250 plus groups). Such an unfavorable rank places CP in the bottom 17% of the 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. Therefore, reckoning the industry’s performance becomes imperative.
Weak Zacks Rank and Style Score: Canadian Pacific Kansas City currently carries a Zacks Rank #4 (Sell). Moreover, CP’s current Momentum Style Score of D shows its short-term unattractiveness.
Other Headwinds: The railroad operator’s total operating expenses have increased 9% year over year in 2021. This was mainly due to the 31% escalation in fuel costs last year. With fuel costs rising as oil prices move north, operating expenses were high (up 15%) in 2022 as well.
Fuel costs jumped 19.4% and 7.3% year over year in first-quarter and second-quarter 2023, respectively. The metric is likely to remain high in third-quarter 2023 as well.
The company’s return-on-equity (ROE) is pegged at 8.9%, below the industry’s level of 24.7%. Lower ROE indicates less efficiency in utilizing the equity capital. The unimpressive reading undercuts CP’s growth potential.
Key Picks
Some better-ranked stocks for investors interested in the Zacks Transportation sector are GATX Corp. (GATX - Free Report) and Kirby Corp. (KEX - Free Report) .
GATX, which presently carries a Zacks Rank #2 (Buy), is aided by gradual improvement in the North American railcar leasing market. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For third-quarter and full-year 2023, GATX’s earnings are estimated to register 36.6% and 14.3% climb, respectively, on a year-over-year basis.
Kirby currently carries a Zacks Rank #2. Strong segmental performances are boosting Kirby’s top line.
For third-quarter and full-year 2023, KEX’s earnings are suggested to record 58.5% and 76.2% improvement, respectively, on a year-over-year basis.
Zacks Names #1 Semiconductor Stock
It's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.
With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.
See This Stock Now for Free >>
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