CPKC Drops After Earnings as Short Build Stalls

Canadian Pacific Kansas City reported Q3 results on October 28 and the market's initial reaction was clear: the stock fell 3.4% the next day, giving back much of the 4.3% gain that had built ahead of the print.

The short-interest build that was the focus of pre-earnings coverage has effectively plateaued. Short interest peaked near 6.06 million shares in mid-to-late October and has barely moved since, ending the week at around 6.04 million shares, or 0.67% of the free float. The one-month pace of accumulation was notable, as the prior note documented, but the week-on-week change is now just 0.3%. Cost to borrow has actually eased sharply, dropping from around 0.58% a week ago to 0.34% today, nearly half its recent level. Availability remains extraordinarily wide at over 7,500%, meaning roughly 75 shares are available to lend for every one currently borrowed. Short sellers are not scrambling for stock, and there is no squeeze pressure anywhere in the lending market. The positioning story has shifted from build to consolidation.

The Street's view of CPKC is a blend of patience and frustration. The stock's EV/EBITDA multiple is running at 14.8x, down modestly over the past 30 days, and the PE sits at 21.4x. Neither is cheap for a railroad facing near-term volume headwinds, but both are well below the peaks that had accompanied optimism around the KCS merger integration. Factor scores reflect the mixed picture: the dividend score ranks in the 98th percentile, a sign of income stability, but the earnings yield ranks only 40th and the EV/EBIT score lands in the 28th percentile, making value-oriented buyers hard to convince. The short score of 28.7 is benign and has barely moved across the past ten sessions, consistent with a stock that is range-bound rather than under active directional pressure.

Ownership data adds one fresh detail. BlackRock filed a Schedule 13G on October 27, disclosing a 5.02% passive stake of 44.1 million shares. This is a first filing from the asset manager on CPKC at this threshold. As always with 13G disclosures, the stake reflects a passive position around the 5% reporting boundary, and BlackRock's actual holding can move in either direction without a further filing until a material threshold is crossed. TCI Fund Management remains the largest disclosed holder at 5.16%, though its most recent filing showed a trim of around 1.2 million shares as of June 30.

Among peers, the week's divergence is worth noting. UNP added 3.8% and NSC rose 3.8% while CP ended the week essentially flat, down 0.2%. Closest Canadian peer CNR also barely moved, up 0.2%. The US Class I rails were the clear outperformers this week. TFII, a correlated name in Canadian transport, was the outlier in the other direction, falling 17% in a single session on what appears to be a company-specific event.

The next scheduled earnings event is January 26, 2027. Between now and then, the question is whether cross-border freight volumes and the KCS integration can show enough improvement to close the valuation gap with US peers, or whether the discount persists into year-end.