CPKC reports higher earnings while an analyst sees trade interdependence as a long-term opportunity
Canadian Pacific Kansas City Ltd. (CPKC) shares rose more than three percent on Thursday morning following the company’s fourth-quarter earnings report, which showed increases in profit and revenue.
According to BNN Bloomberg, CPKC reported an 18 percent increase in net income, reaching $1.2bn compared to $1.02bn in the same period last year.
Revenue rose three percent to $3.87bn from $3.78bn a year earlier.
Despite concerns over potential US tariffs on Canadian imports, one analyst sees trade interdependence in North America as an opportunity for CPKC.
Jeff Kauffman, a transportation and logistics partner at Vertical Research Partners, told BNN Bloomberg that the company’s acquisition of Kansas City Southern in December 2021 has positioned it to benefit from nearshoring and onshoring trends.
“Despite maybe some short-term risk, we think this is a big long-term opportunity. And CP really kind of puts itself right at the center of that discussion with almost 41 percent of their traffic either cross border Canada or cross-border Mexico,” Kauffman said.
In November, US President Donald Trump threatened to impose a 25 percent tariff on all Canadian imports on his first day in office.
While the tariff was not implemented, Trump has since floated the idea again, with a potential decision expected on February 1.
Kauffman noted that tariffs were a key issue during Trump’s first administration, leading to the signing of the United States-Mexico-Canada Agreement (USMCA) in 2020. “And we saw trade grow 20 percent in the three years after that,” he said.
He added that tariffs could be a negotiation tool for US policymakers, particularly in addressing concerns about Chinese goods entering the country via Canada and Mexico, as well as border security measures.
Kauffman highlighted that CPKC is making operational improvements following the Kansas City Southern integration. He pointed to the expansion of the Laredo bridge, a major cross-border route between Mexico and the US, which is expected to double the company’s traffic capacity in the region.
“So, what that’s resulting in is longer trains, fewer crews, faster network speed, more efficiency, and then as the network gets better you see the drop in personal injuries, you’ll see the return of excess locomotives and excess assets back to storage,” Kauffman said. a