CPKC (CP) — Q3 core EPS up 16% as a 61% jump in the fuel bill squeezes margins; ~29x trailing P/E

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Quick version: 60-second Short

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The short version: growth on the rails, fuel in the margin

Canadian Pacific Kansas City (TSX: CP), the only railway that links Canada, the United States and Mexico on one network, closed at CA$125.52 on October 23, 2026, up about 17% over twelve months and about 1.5% over the past month. Its third-quarter report on October 28 showed core adjusted earnings per share up 16% on 15% revenue growth, yet the U.S.-listed shares fell about 3.6% after hours. The new story is a fuel squeeze: CPKC’s fuel bill rose about 61% from a year earlier, and that pushed its operating ratio the wrong way.

At about 29x trailing earnings, the most of any company in this group, the question for a new buyer is how quickly CPKC’s growth turns back into margin once diesel cools. Below we go through the quarter, the fuel hit and the buybacks, and how CPKC compares with its closest TSX freight peers — CN Rail, TFI International, Exchange Income, Mullen Group and Cargojet — on size, returns, valuation, dividends and analyst targets.

What happened: Q3 2026 results on October 28

On October 28, 2026, after the market close, CPKC reported its third-quarter results:

• Revenue of C$4.22B, up 15% (about 13% in constant currency), on 6% more volume measured in revenue ton-miles.
• Core adjusted diluted EPS of C$1.28, up 16% from C$1.10, but about 3 cents below the roughly C$1.31 analysts expected.
• Reported diluted EPS of C$1.04, up 3%, held back by a C$94M tax charge tied to a Canada Revenue Agency reassessment of prior years linked to the Kansas City Southern deal.
• Fuel expense of C$667M, up from C$415M, on an average fuel price of US$4.49 a gallon, up 53%.
• Core adjusted operating ratio of 61.9%, up from 60.7%. Fuel alone was a 190 basis point headwind.

The operating ratio is the share of revenue eaten by operating costs, so a higher number is worse. CPKC ran the network better than a year ago: train speed improved about 8% and terminal dwell about 7%, and fuel efficiency improved 3%. The miss came from the price of diesel, not from the railroad running poorly. Fuel surcharges eventually pass most of that cost to customers, but they lag the pump price, so a quarter of fast-rising diesel squeezes the margin first.

Where the growth came from

• Grain revenue rose 29%, with record volumes as Canadian farmers shipped a large carry-out and exports stayed strong.
• Intermodal revenue rose 22%, with record domestic and international container volumes.
• Coal volumes fell 11% on production problems at the mines, and automotive volumes fell 5% on plant retooling.
• Buybacks: CPKC repurchased about 11.5 million shares for about C$1.49B in the quarter. Management said more than C$4B went back to shareholders through buybacks and dividends in the first nine months.
• New coal deal: an expanded agreement with Elk Valley Resources moves about half of the coal that was interchanged to CN at Kamloops back onto CPKC’s own route to Vancouver.

The weak spots are the operating ratio and the earnings miss, and both matter for the valuation below. A stock priced near 29x earnings needs the margin to improve, not just the volume.

Business overview: CPKC vs Canadian transportation peers

CPKC hauls grain, potash, coal, energy and chemical products, metals, autos and containers. The 2023 combination with Kansas City Southern created a single line from Western Canada through the U.S. Midwest to Mexico and the Gulf Coast. Bulk commodities such as grain and coal swing with harvests and mine output. Intermodal, merchandise and the Canada-Mexico “land bridge”, which management expects to exit 2026 above C$600M of annual revenue, are the growth parts.

On the TSX screener, CPKC sits in the Transportation sector. CN Rail (CNR) is the other Canadian Class I railway and the cleanest comparison. TFI International (TFII) and Mullen Group (MTL) are the large trucking and logistics names that compete with rail for freight. Exchange Income (EIF) combines regional aviation with manufacturing, and Cargojet (CJT) is the air-cargo carrier. Air Canada was left out as a passenger airline with no dividend, and Westshore Terminals, StorageVault and the sub-C$1B names were left out as not comparable.

Overview table

Company (Ticker)	Price	Market cap	Revenue (LTM)	Net income (LTM)
CPKC (CP)	$125.52	$110.3B	$15.4B	$3.87B
CN Rail (CNR)	$172.50	$104.4B	$17.8B	$4.78B
TFI International (TFII)	$157.13	$12.9B	$11.2B	$464M
Exchange Income (EIF)	$112.60	$6.35B	$3.71B	$205M
Mullen Group (MTL)	$28.76	$2.77B	$2.34B	$123M
Cargojet (CJT)	$83.11	$1.23B	$1.04B	$46M
Average (incl. CP)	—	$39.7B	$8.59B	$1.58B

Source: TSX screener (October 25, 2026, tsx-2026-10-25.csv) · CAD · LTM = last 12 months. Average includes CP; blank cells skipped.

CPKC is the largest company here by market value at C$110.3B, just ahead of CN at C$104.4B, even though CN brings in more revenue (C$17.8B vs C$15.4B) and more net income (C$4.78B vs C$3.87B). The market is paying more for each dollar of CPKC’s profit, and that gap is the growth premium. The truckers and air-cargo names are a fraction of the size.

Performance: CPKC trails CN and Mullen over a year

Performance table

Company (Ticker)	1M	3M	6M	1Y	5Y	10Y
CPKC (CP)	+1.5%	−3.7%	+6.6%	+17.3%	+35.1%	+225%
CN Rail (CNR)	+3.0%	−6.8%	+10.8%	+28.3%	+4.8%	+98.8%
TFI International (TFII)	−10.4%	−27.0%	−16.8%	+19.3%	+9.9%	+479%
Exchange Income (EIF)	−5.4%	−11.0%	+9.0%	+46.0%	+156%	+194%
Mullen Group (MTL)	+9.6%	+5.7%	+46.1%	+99.9%	+101%	+57.4%
Cargojet (CJT)	−3.4%	−2.3%	+4.5%	+1.7%	−58.2%	+85.5%
Average (incl. CP)	−0.8%	−7.5%	+10.0%	+35.4%	+41.3%	+190%

Source: TSX screener (October 25, 2026). Average includes CP; blank cells skipped. Price change by window.

Over one month, CPKC is up 1.5%, behind CN’s 3.0% and well behind Mullen’s 9.6%, while TFI fell 10.4%. Over one year, CPKC’s +17.3% trails CN at +28.3% and Mullen, which roughly doubled (+99.9%). Cargojet is nearly flat at +1.7%. CPKC has not led this group on recent returns.

Over the longer windows, CPKC’s +225% over ten years is well ahead of CN’s +98.8%, while its five-year +35.1% sits in the middle. The long-run chart reflects the turnaround and the Kansas City Southern deal more than the past year.

Valuation: the priciest railway, carried by margins

Valuation table

Company (Ticker)	P/E	Fwd P/E	PEG	P/S	P/B	P/FCF	Price/Cash
CPKC (CP)	29.15	22.75	—	7.29	2.37	46.34	304
CN Rail (CNR)	22.16	20.19	3.08	5.99	4.76	29.54	356
TFI International (TFII)	27.91	15.79	—	1.18	3.33	14.20	44.42
Exchange Income (EIF)	31.30	23.32	0.64	1.77	3.46	—	78.88
Mullen Group (MTL)	22.56	18.18	1.17	1.35	2.31	17.38	13.15
Cargojet (CJT)	26.93	20.67	—	1.21	1.68	14.52	310
Average (incl. CP)	26.67	20.15	1.63	3.13	2.99	24.40	184

Source: TSX screener (October 25, 2026). Average includes CP; blank cells skipped. Highlighted = lowest (cheapest) positive value per column.

CPKC trades at about 29x trailing earnings, above the group average of 26.67 and well above CN at 22.16, the cheapest in the group. On expected earnings the gap narrows to about 23x vs 20x, so the market is pricing in faster profit growth at CPKC than at CN. Its price-to-sales ratio of 7.29 is the highest here by a wide margin. That reflects margins: railways keep far more of each revenue dollar than truckers do, so TFI at 1.18 sales is not a like-for-like bargain.

The catch is cash flow. At 46.34 times free cash flow, CPKC is the most expensive name on that column, against 29.54 for CN and 14.20 for TFI. Price to book, about 2.37, sits near the low end, since the Kansas City Southern purchase added a large equity base. If capital spending keeps falling and fuel surcharges catch up, the free-cash-flow multiple is the one that should come down.

Dividend: a small yield, most cash goes to buybacks

Dividends table

Company (Ticker)	Dividend / share	Yield	Payout ratio
CPKC (CP)	$0.87	0.79%	22.1%
CN Rail (CNR)	$3.55	2.12%	46.3%
TFI International (TFII)	$2.53	1.65%	45.9%
Exchange Income (EIF)	$2.66	2.56%	72.2%
Mullen Group (MTL)	$0.84	2.92%	65.2%
Cargojet (CJT)	$1.40	1.85%	47.6%
Average (incl. CP)	$1.98	1.98%	49.9%

Source: TSX screener (October 25, 2026). Average includes CP; blank cells skipped. Yield = indicated.

CPKC’s annual dividend per share is about C$0.87, and the quarterly dividend is now C$0.268, up from C$0.228 a year earlier. The indicated yield of 0.79% is the lowest in this group, against an average of 1.98%, and the payout ratio of 22.1% is also the lowest. Mullen (2.92%) and Exchange Income (2.56%) are the income names here. CPKC is not an income pick at this price. Buybacks, which were roughly six times the quarter’s dividend payments, are the main way it returns cash.

Analyst view: a Buy with single-digit upside

Analyst table

Company (Ticker)	Rating	Price	Target 1Y	Upside	Analysts
CPKC (CP)	Buy	$125.52	$135.20	+7.7%	15
CN Rail (CNR)	Buy	$172.50	$183.11	+6.2%	20
TFI International (TFII)	Strong buy	$157.13	$179.40	+14.2%	4
Exchange Income (EIF)	Strong buy	$112.60	$145.92	+29.6%	13
Mullen Group (MTL)	Buy	$28.76	$30.22	+5.1%	8
Cargojet (CJT)	Strong buy	$83.11	$121.00	+45.6%	11
Average (incl. CP)	—	—	—	+18.0%	—

Rating & price: TSX screener (October 25, 2026). Target 1Y: MarketBeat TSE-page consensus in C$, pulled Oct 27 2026: CP C$135.20 (15 analysts), CNR C$183.11 (20), TFII C$179.40 (4 - THIN), EIF C$145.92 (13), MTL C$30.22 (8), CJT C$121.00 (11). Screener prices = October 23, 2026 closes (merge 2026-10-25). Oct 28 closes from Yahoo Finance chart history. Upside = target ÷ price − 1. Thin coverage (<5 analysts): TFII.

The TSX screener rates CPKC a Buy. The consensus one-year target is C$135.20 from 15 analysts, about 7.7% above the October 23 price and about 7.6% above the October 28 close of C$125.70. On October 15, ATB Cormark raised its target to C$146 from C$143 with an Outperform rating. On the U.S. listing, Citi cut its target to US$102 from US$109 on October 7, and Susquehanna cut to US$98 from US$106 on October 2. Of the 15 analysts, one rates it a Strong Buy, ten a Buy and four a Hold. CPKC’s upside is close to CN’s 6.2%, while Exchange Income and Cargojet carry much bigger gaps to their targets. The Street likes the railways, but there is not much room left to the consensus on either one.

Why it matters: from deal-driven growth to margin delivery

The old narrative was CPKC as the growth railway, built by linking three countries on one network and priced for the volume that combination would unlock. The volume is arriving: RTMs were up 6%, pricing on renewals is running about 3% to 4%, and grain and intermodal hit records.

The new narrative is margin delivery. The question is how much of that growth reaches profit when diesel spikes. For now fuel is taking a bigger bite of each revenue dollar, and at about 29x earnings investors are paying for growth that has to show up in the operating ratio.

Bull case

1. Fuel is mostly a pass-through. Surcharges lag the pump price, so the operating ratio could recover if diesel cools, and management is targeting a fourth-quarter operating ratio below 60%.
2. Growth is broad. Record grain and intermodal volumes, the expanding Canada-Mexico land bridge and the new Elk Valley Resources coal deal that wins traffic back from CN add to growth that does not depend on one commodity.
3. Spending is falling. Capital spending is set at about C$2.65B for 2026, about 15% lower than last year, which frees more cash for buybacks.

Bear case and risks

1. Little room for misses. At about 29x trailing earnings and 46x free cash flow, even a 3-cent miss moved the stock, and this quarter was one.
2. Fuel and the economy are outside its control. Coal and automotive volumes are already weak, and management said fuel surcharges are making some customers rethink how they ship.
3. Tougher comparisons. Management estimates the new Canadian grain crop at about 76 to 78 million tonnes, about 8% below the record, which could slow grain growth into 2027.

What to watch

1. The fourth-quarter operating ratio. Management expects it below 60%. A miss there would test the valuation more than this quarter did.
2. CN’s results on October 30, 2026. They are a direct read on Canadian rail demand and on the coal traffic shifting between the two railways.
3. The Union Pacific–Norfolk Southern review. CPKC wants the U.S. Surface Transportation Board to reject the proposed combination and plans its next filing on November 18.
4. Diesel prices and fuel surcharges. How fast surcharges catch up decides whether the fuel headwind fades in the next quarter or two.

Bottom line

CPKC has earned its growth premium on volume: revenue up 15%, record grain and intermodal, and a network running faster than a year ago. The quarter shows the cost of that premium, though. A 61% jump in the fuel bill and a 3-cent miss were enough to push the shares down after hours, because at about 29x trailing earnings the market wants margin, not just volume. The next test is the fourth quarter, where management has promised an operating ratio below 60%. If fuel surcharges catch up and capital spending keeps falling, the premium has support. If not, the valuation is the first thing to give.

Video chapters

• 0:00 Hook — core EPS +16%, fuel bill +61%
• 0:21 What happened — Q3 results, fuel, operating ratio, buybacks
• 1:11 Overview — CPKC vs Canadian freight peers
• 1:38 Performance heatmap
• 1:55 Valuation (~29x trailing, ~23x forward)
• 2:23 Dividends
• 2:43 Analyst ratings & targets
• 3:10 Why it matters
• 3:28 Bull case
• 3:50 Bear case
• 4:06 What to watch

Data notes

Table figures are TSX screener values (merge tsx-2026-10-25.csv, 2,532 rows; October 23, 2026 closes; CAD). Peers are from CPKC’s screener sector (Transportation) and business-comparable freight and logistics names: CN Rail (the other Canadian Class I railway), TFI International and Mullen Group (trucking and logistics), Exchange Income (aviation and manufacturing) and Cargojet (air cargo); Air Canada, Westshore Terminals, StorageVault and sub-C$1B names were left out. Average rows include CPKC and skip blank cells. Target 1Y is the MarketBeat TSX-listing consensus in CAD pulled 2026-10-27: CPKC C$135.20 (15 analysts), CN C$183.11 (20), TFI C$179.40 (4, thin), Exchange Income C$145.92 (13), Mullen C$30.22 (8) and Cargojet C$121.00 (11). October 28 closes are from Yahoo Finance chart history. Quarterly figures are from CPKC’s Q3 2026 release (CAD unless marked); the consensus EPS estimate and the after-hours move on the NYSE listing are from Investing.com’s October 28 earnings call coverage.

Sources

• CPKC news release, October 28, 2026 — “CPKC reports solid third quarter results; on track to deliver a strong 2026”
• CPKC Q3 2026 earnings conference call, October 28, 2026 (transcript via Investing.com)
• Investing.com, October 28, 2026 — “Canadian Pacific Kansas City earnings missed by C$0.03, revenue was in line with estimates”
• MarketBeat, October 15, 2026 — ATB Cormark target change and CPKC consensus; MarketBeat TSX forecast pages pulled October 27, 2026
• MarketBeat — Citi (October 7, 2026) and Susquehanna (October 2, 2026) target changes on NYSE: CP
• Yahoo Finance chart history — TSX closes, October 21–28, 2026
• TSX screener merge October 25, 2026 (2,532 rows)

Media credits

Wikimedia Commons: CPKC logo (File:CPKC Brand Logo 2023.png, public domain); “CPKC 4859 near Spokane Washington” by Guywelch2000 (CC BY 4.0); “CPKC Toronto Yard” by DevvyDog (CC BY-SA 4.0); “Grain train-3” by Wikideas1 (CC0); “CPKC Vaughan Intermodal facility” by HYP3RDRIVES (CC BY-SA 4.0); “Streetsville ON CPKC Freight-Train 2025-09-09” by Milan Suvajac (CC BY-SA 4.0); “CPKC Train 181 at Gentry, AR - January 14, 2024” by ConrailFan76 (CC BY 4.0). No AI-generated images were used.

By Andrew · stocksummarizer.com