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  5. CP: Please comment on latest earnings reports and your recommendations on these. [Canadian Pacific Kansas City Limited]
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Q: Please comment on latest earnings reports and your recommendations on these. Thank you.
Asked by D on August 02, 2023
5i Research Answer:

For RS, EPS of $6.49 missed expectations of $6.57 and revenues of $3.88B missed expectations of $3.99B. Net sales declined slightly by 2.1% and tons sold declined by 2.4% sequentially but grew 1.9% year-over-year. RS demonstrated good gross profit margins of 31.5% and continues to buyback shares. Management fees underlying demand will remain healthy across most of its end markets, but seasonality will have a negative impact in the coming quarter. This was an OK quarter, and the market seemed to mostly shrug it off.

CP reported EPS of $0.83 missing estimates of $0.943 and revenues of $3.338B beat estimates of $3.298B. During the quarter the company completed its combination to create the first single-line transnational railroad linking Canada, the US and Mexico. Its operating ratio increased by 9.7% to 70.3%, and management expects to deliver mid-single-digit core adjusted combined diluted EPS growth in 2023, despite a challenging environment. These were OK results and the stock sold off slightly following the release. We continue to like the name over the long-term, and feel that its new transnational railroad will lead to positive synergies in the future. 

We like both names, but largely we would prefer RS here, due to its potential for higher growth in the future. 

Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in RS.