Canadian Pacific Kansas City Ltd. faced a $200 million setback due to the ongoing tariff dispute initiated by the United States, according to CEO Keith Creel. Creel, despite concerns regarding the North American free trade agreement, expressed optimism during a recent conference call with analysts. The CEO, overseeing the only railroad spanning all three countries in North America, mentioned the potential benefits of the upcoming renegotiation of the United States-Mexico-Canada Agreement (USMCA) in balancing trade flows and addressing the trade deficit highlighted by President Trump.
Emphasizing the significance of trade among the three nations, Creel remained hopeful for a positive renewal of the USMCA, stressing the interdependence of the countries for mutual success. He anticipated a potential renewal of the agreement before the midterms, underscoring the importance of continued trade growth among the nations.
Despite facing challenges, CPKC managed to increase revenue slightly in its latest quarter to $3.92 billion, attributed to enhanced operational efficiency and a modest uptick in freight volumes. Notably, strong grain revenues were recorded, yet adverse weather conditions at the Port of Vancouver affected the overall increase. National Bank analyst Cameron Doerksen highlighted CPKC’s growth prospects driven by new business ventures and synergies from previous mergers.
Although revenue saw a positive trend throughout the year, CPKC reported a 10% decline in profits for the latest quarter, with net income dropping to $1.08 billion. Apart from trade uncertainties, the rail industry also faces anxiety stemming from proposed mergers, such as Union Pacific Corp.’s bid to acquire Norfolk Southern Corp., potentially reshaping the North American rail landscape.
Creel voiced concerns over the consolidation trend, warning about the potential negative impacts on competition and market dynamics. The Surface Transportation Board recently rejected the UP-NS merger application, raising questions about the potential consequences of such a significant merger on the rail industry in North America.
CPKC’s core adjusted diluted earnings for the latest period increased by three percent to $1.33 per share, slightly below analysts’ projections. The company reported a notable 11% jump in net income for the full year, reaching $4.14 billion, with revenues climbing nearly four percent to $15.08 billion. Looking ahead, CPKC anticipates volume growth and a reduction in capital expenditures for the coming years, while also announcing a quarterly dividend for shareholders.
Overall, CPKC remains cautiously optimistic about its future prospects despite the challenges posed by trade disputes and industry consolidation efforts.
