Canadian Pacific boosts efficiency amid rising fuel costs
- In the second quarter of 2024, Canadian Pacific reported a 7% decrease in labor costs, contributing to its operational efficiency.
- The company faced challenges with rising fuel costs, which increased by 17% year over year, raising liquidity concerns.
- Despite these challenges, CP's stock has performed well, increasing by 4.4% year to date, although it holds a Zacks Rank of #3 (Hold).
Canadian Pacific Kansas City (CP) has demonstrated significant operational efficiency and cost-cutting measures, particularly in the second quarter of 2024. The company reported a 7% decrease in labor costs year over year, amounting to $612 million, which constitutes 26.2% of its overall operating expenses. This proactive approach has allowed CP to maintain shareholder confidence, as evidenced by increasing dividend payouts from C$507 million in 2021 to C$707 million in 2022 and 2023. In the second quarter of 2024, CP distributed a quarterly dividend of 19 cents per share. Despite these positive developments, CP faces challenges, particularly with rising fuel costs, which surged by 17% year over year in the same quarter. The company ended the June quarter with $557 million in cash and cash equivalents, while its current debt stood at $3.67 billion. This situation has raised concerns regarding liquidity, as indicated by a current ratio of 0.51, suggesting potential difficulties in meeting short-term obligations. The stock performance of Canadian Pacific has been relatively strong, with shares increasing by 4.4% year to date, outperforming the industry average growth of 0.7%. However, the company currently holds a Zacks Rank of #3 (Hold), reflecting a cautious outlook amid ongoing economic uncertainties. Investors are advised to consider other stocks in the transportation sector, such as C.H. Robinson Worldwide and WAB, which have higher Zacks Ranks and promising earnings growth rates, indicating more favorable investment opportunities.