Is CP stock a buy as Canadian Pacific sees top line surge 7% YoY in Q2?

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Is CP stock a buy as Canadian Pacific sees top line surge 7% YoY in Q2?

 Is CP stock a buy as Canadian Pacific sees top line surge 7% YoY in Q2?
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Highlights

  • Canadian Pacific saw its total revenue rise by seven per cent year-over-year (YoY) in Q2 FY2022
  • CP has announced a quarter dividend of C$ 0.19
  • CP stock jumped by over eight per cent in 52 weeks

Canadian Pacific (TSX: CP) has been upticking on the stock market after the railway company announced a quarterly dividend of C$ 0.19 (due on October 31) a day before releasing its financial results for Q2 FY2022.

On Thursday, July 28, the Canadian industrial company highlighted that with its proposed combination with Kansas City Southern, it is planning to build the ‘first’ single railway line connecting the United States, Mexico and Canada. However, it said this merger is yet to receive approval from the US Surface Transportation Board.

Canadian Pacific added that with this merger, its aims to connect customers to new markets, promote competition in the US railway system and stimulate economic growth throughout North America.

On this note, let us closely view its financial performance in Q2 2022 and stock performance. 

Canadian Pacific Railway Limited (TSX: CP)’s Q2 2022 financial results

Canadian Pacific saw its total revenue rise by seven per cent year-over-year (YoY) to C$ 2.2 billion in the second quarter of FY2022 compared to C$ 2.05 billion a year ago. The large-cap rail transportation company said that its freight revenue grew to C$ 2.15 billion in the latest quarter from C$ 2 billion in the same quarter of 2021. In addition, non-freight revenue climbed higher to C$ 48 million in Q2 2022 compared to C$ 46 million in the previous quarter.

Canadian Pacific Railway Limited (TSX: CP)’s Q2 2022 financial results

The Canadian railroad operator saw its operating income spike to C$ 868 million in the second quarter this year, higher than C$ 820 million a year ago. However, the C$ 91-billion market cap company noted its net profit decreased to C$ 765 million in the latest quarter compared to C$ 1.24 billion a year ago.

Canadian Pacific’s stock performance

The CP stock jumped by over eight per cent in 52 weeks and was down by roughly seven per cent from a 52-week high of C$ 105.46 (March 31). According to Refinitiv, Canadian Pacific stocks seem to have gained momentum as its Relative Strength Index (RSI) value reached 68.82 on July 27.

Bottomline

Canadian Pacific could see significant growth if it receives approval for the KCS merger. The railway operator also noted a debt-to-equity (D/E) ratio of 0.58, which generally depicts less financial risk. Hence, investors with a low-risk level could explore CP stock for growth and long-term value.

Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks. 

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