Canadian Pacific Railway Limited Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

The yearly results for Canadian Pacific Railway Limited (TSE:CP) were released last week, making it a good time to revisit its performance. Canadian Pacific Railway reported CA$7.7b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of CA$17.97 beat expectations, being 5.3% higher than what the analysts expected. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.

See our latest analysis for Canadian Pacific Railway

Taking into account the latest results, the current consensus from Canadian Pacific Railway's 17 analysts is for revenues of CA$8.46b in 2021, which would reflect a solid 9.7% increase on its sales over the past 12 months. Statutory earnings per share are predicted to swell 13% to CA$20.32. Before this earnings report, the analysts had been forecasting revenues of CA$8.33b and earnings per share (EPS) of CA$20.10 in 2021. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

The analysts reconfirmed their price target of CA$468, showing that the business is executing well and in line with expectations. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Canadian Pacific Railway, with the most bullish analyst valuing it at CA$506 and the most bearish at CA$320 per share. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Of course, another way to look at these forecasts is to place them into context against the industry itself. It's clear from the latest estimates that Canadian Pacific Railway's rate of growth is expected to accelerate meaningfully, with the forecast 9.7% revenue growth noticeably faster than its historical growth of 5.2%p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 7.0% next year. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Canadian Pacific Railway to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at CA$468, with the latest estimates not enough to have an impact on their price targets.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. We have forecasts for Canadian Pacific Railway going out to 2025, and you can see them free on our platform here.

That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 2 warning signs with Canadian Pacific Railway , and understanding them should be part of your investment process.

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This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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