Canadian Pacific Kansas City posted lower profits in its latest quarter as trade uncertainty between Canada and the United States and a challenging macro environment continued to pressure freight demand. Analysts say disciplined cost control and resilient volumes helped limit the impact despite weakness in several end markets.
BNN Bloomberg spoke with Ari Rosa, senior equity analyst at Citi, about Canadian Pacific Kansas City’s earnings performance, how tariffs and macro headwinds are affecting rail demand, and why the company could be positioned to benefit if economic conditions improve later in the year.
Key Takeaways
- Canadian Pacific Kansas City profits declined as trade uncertainty and macro weakness weighed on freight demand.
- Construction-related end markets remain under pressure, while agricultural shipments continue to provide support.
- Strong cost control and operational efficiency are helping protect margins in a soft demand environment.
- Rail stocks have lagged broader market gains, leaving Canadian Pacific Kansas City’s valuation relatively attractive.
- Analysts expect conditions to improve later in the year as seasonal demand and tighter trucking markets provide support.
Read the full transcript below:
ROGER: Canadian Pacific Kansas City says profit fell in its latest quarter against a challenging macro backdrop fueled by trade uncertainty between the U.S. and Canada. For more, I’m joined by Ari Rosa, senior equity analyst at Citi. Ari, thank you very much for joining us.
ARI: Absolutely. Thanks for having me.
ROGER: What was the biggest area of concern in the quarter?
ARI: As you mentioned, the overall macro environment continues to be challenging, and that’s certainly a concern. But I would actually frame it a bit differently. In the context of a difficult macro backdrop, this was a pretty decent result. Canadian Pacific continues to lead the industry in volume and earnings growth, and it provided a solid outlook despite those challenges.
I think it’s a stock that’s well positioned if we do see a macro recovery or some tariff resolution, which hopefully comes over the next six months. We’ve been here before, but from these levels the stock looks quite well set up. The valuation also isn’t particularly stretched, which is one of the reasons we like it. While there are challenges across the transportation sector, Canadian Pacific stands out as one of the more attractive names in our coverage.
ROGER: So if we look at it that way, what did the company do right?
ARI: Cost control has been very strong. Service levels are good, and safety metrics remain near industry best. In Canada, many people are familiar with CEO Keith Creel, who’s widely regarded as one of the industry’s top leaders. Despite the uncertainty, the company continues to execute well, and that positions it nicely for an eventual macro recovery.
ROGER: Are there signs that recovery could start this year, especially with CUSMA negotiations still ahead?
ARI: That’s where we’re a bit more cautious. There aren’t many reasons to get excited in the near term. But for investors with a one- to two-year-plus horizon, we think this is an attractive entry point. Rail stocks haven’t really participated in the broader rally, and within our coverage, rails are still reasonably valued. If you’re looking for a growth-at-a-reasonable-price story, Canadian Pacific fits that narrative well.
ROGER: What other headwinds are they facing beyond CUSMA and the broader slowdown?
ARI: Tariff pressure and macro weakness remain key issues. Housing construction end markets have been soft, and intermodal has been challenging. End markets tied to construction, including metals, minerals and forest products, have seen pressure.
On the other hand, there’s been strength in grain. Canada had a record grain crop, which tends to be very profitable for Canadian Pacific. That helps carry the company through this period. Encouragingly, cost control has been strong, and the company delivered an industry-leading operating ratio, even in a tepid demand environment.
ROGER: What specifically are they doing on costs, and can that continue?
ARI: You’re seeing headcount reductions and efficiency gains, which does raise broader concerns about the Canadian economy. At the same time, the network is running very well, allowing the company to better leverage equipment and improve asset turns.
That’s not unique to Canadian Pacific — service levels across North American railroads are among the best they’ve ever been — but Canadian Pacific is extracting more efficiency than most peers. As a result, margins are holding up reasonably well given the challenging backdrop.
ROGER: Looking into 2026, when might we see signs they’ve turned a corner?
ARI: This isn’t unique to Canadian Pacific. We’ve heard similar commentary from UPS, Union Pacific and others about a “tale of two halves.” There’s pressure in the first quarter, which has been compounded by a difficult winter, but conditions should improve as we move into the spring and summer.
Another supportive factor is tightening in the U.S. trucking market, which could translate into better volume growth and pricing for the rails over time.
ROGER: We’ve been talking a lot about automation in trucking. Is that coming to rail as well?
ARI: It’s an interesting topic. People have been talking about autonomous trucks for close to a decade, but from both a regulatory and technological standpoint, it’s still some distance away. It’s probably not something that matters in the next cycle.
If anything, autonomous technology arguably makes more sense for rail than for trucks on highways. There may be efficiency opportunities over time, but right now it’s not a major focus. For railroads, regulatory hurdles are likely a bigger obstacle than the technology itself.
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This BNN Bloomberg summary and transcript of the Jan. 29, 2026 interview with Ari Rosa are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
