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Here's Why You Should Hold Canadian Pacific KC (CP) Stock Now
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Canadian Pacific Kansas City Limited (CP - Free Report) is benefiting from a gradual recovery in freight-market conditions. However, low cash balance is a headwind.
With the gradual recovery in freight-market conditions, freight revenues, contributing majority to the top line, increased 4% in 2021. In 2022, freight revenues increased 10% despite headwinds like supply-chain woes. The increase was owing to a rise in freight revenues at key sub-groups like Grain (up 5%), Potash (up 25%), Forest products (up 16%), Metals, minerals and consumer products (up 21%), Automotive (up 16%) and Intermodal (up 30%).
Revenues at the Fertilizers and sulfur sub-segment were up 9% year over year. In 2022, total freight revenues per revenue ton-miles rose 11% year over year. Total freight revenues per carload increased 9% year over year. Freight revenues increased 23% in first-quarter 2023.
We are encouraged by CP’s decision to pay dividends even in the current uncertain scenario. Evidently, the company paid dividends worth C$507 million in 2021, up 8.6% year over year. In 2022, it shelled out dividends worth C$707 million, up 39.4% year over year. In first-quarter 2023, Canadian Pacific KC disbursed dividends worth C$177 million.
Key Risks
Canadian Pacific KC is a highly leveraged company. CP exited the first quarter of 2023 with cash and cash equivalents of C$290 million, way below the long-term debt of C$18,066 million This implies that the company does not have enough cash to meet its debt levels.
Zacks Rank
CP currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Triton International Limited .
Copa Holdings, which presently flaunts a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.
Triton, which currently carries a Zacks Rank #2 (Buy), is benefiting from its consistent efforts to reward shareholders through dividends and share repurchases.
Triton has an impressive liquidity position. TRTN’s current ratio (a measure of liquidity) was 3.97 at the end of first-quarter 2023. A current ratio of more than 1 often indicates that the company will be easily paying off its short-term obligations.
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Here's Why You Should Hold Canadian Pacific KC (CP) Stock Now
Canadian Pacific Kansas City Limited (CP - Free Report) is benefiting from a gradual recovery in freight-market conditions. However, low cash balance is a headwind.
Factors Favoring (CP - Free Report)
With the gradual recovery in freight-market conditions, freight revenues, contributing majority to the top line, increased 4% in 2021. In 2022, freight revenues increased 10% despite headwinds like supply-chain woes. The increase was owing to a rise in freight revenues at key sub-groups like Grain (up 5%), Potash (up 25%), Forest products (up 16%), Metals, minerals and consumer products (up 21%), Automotive (up 16%) and Intermodal (up 30%).
Revenues at the Fertilizers and sulfur sub-segment were up 9% year over year. In 2022, total freight revenues per revenue ton-miles rose 11% year over year. Total freight revenues per carload increased 9% year over year. Freight revenues increased 23% in first-quarter 2023.
We are encouraged by CP’s decision to pay dividends even in the current uncertain scenario. Evidently, the company paid dividends worth C$507 million in 2021, up 8.6% year over year. In 2022, it shelled out dividends worth C$707 million, up 39.4% year over year. In first-quarter 2023, Canadian Pacific KC disbursed dividends worth C$177 million.
Key Risks
Canadian Pacific KC is a highly leveraged company. CP exited the first quarter of 2023 with cash and cash equivalents of C$290 million, way below the long-term debt of C$18,066 million This implies that the company does not have enough cash to meet its debt levels.
Zacks Rank
CP currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks for investors interested in the Zacks Transportation sector are Copa Holdings, S.A. (CPA - Free Report) and Triton International Limited .
Copa Holdings, which presently flaunts a Zacks Rank #1 (Strong Buy), is aided by improved air-travel demand. We are encouraged by the company’s initiatives to modernize its fleet. CPA's focus on its cargo segment is also impressive. You can see the complete list of today’s Zacks #1 Rank stocks here.
For second-quarter and full-year 2023, CPA’s earnings are expected to register 765.6% and 75.4% growth, respectively, on a year-over-year basis.
Triton, which currently carries a Zacks Rank #2 (Buy), is benefiting from its consistent efforts to reward shareholders through dividends and share repurchases.
Triton has an impressive liquidity position. TRTN’s current ratio (a measure of liquidity) was 3.97 at the end of first-quarter 2023. A current ratio of more than 1 often indicates that the company will be easily paying off its short-term obligations.