CP Stock: 1 Key Catalyst Investors Should Watch

After a positive surprise in the last quarter, CP stock (TSX:CP) recently made a change that should have investors excited about the first quarter.

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Canadian Pacific Kansas City (TSX:CP) looks like it might have some good news for investors when considering earnings. The company is set to release results before market open on April 24. Yet there is a key change the company recently made that could give investors insight into what’s going on.

The change

The big change that investors may have noticed is that CP recently announced a few weeks ago that it would report its first quarter financial operating and financial results for 2024 after the market close on April 24. However, this was recently changed to before market open last week.

Why does that matter? After-hours earnings announcements can create a frenzy of trading activity, leading to sharp price swings up or down based on initial reactions. Releasing earnings before market open allows for a more measured response from investors. 

Overall, by releasing earnings before the market opens, all investors have equal access to the information at the same time. This avoids any advantage for those who might have access to after-hours leaks or news. Meanwhile, after hours earnings reports would be beneficial if the company anticipates a negative earnings report. This can minimize the immediate market reaction and give them some time to control the narrative before the stock market opens the next day.

Bottom line here? CP stock wants attention, and likely has some very good news so the company wants to be at the forefront during its release.

The momentum

So what might the good news include? To get an idea, let’s look at the last few quarters to see the kind of momentum that CP stock has experienced. During the second quarter, it was all about delivering on the benefits that came with a combined network. The company announced revenues of $3.2 billion and diluted earnings per share (EPS) of $1.42 for the quarter. It also stated it expects to see mid-single-digit growth in diluted EPS.

By the third quarter, CP stock announced revenues of $3.3 billion and diluted EPS of $0.84. It also updated the guidance, stating that diluted EPS could now be flat or slightly positive as economic challenges continued.

When the fourth quarter hit, there was a major improvement. Revenue surged to hit $3.8 billion, with diluted EPS rising significantly to $1.10. The performance allowed for a strong year, with diluted EPS soaring past estimates to hit $4.21, compared to the $3.77 expected.

What to watch

When it comes to the first quarter then, what we need to look at is the strength of CP stock in the last year. During all these trying times, CP stock has managed to bring strong momentum into 2024. The company now expects diluted EPS to grow in the double digits. It’s expecting further synergy opportunities, with improving conditions and economic recovery. All this would be good news for the company.

For now, if the stock hopes to achieve higher results than the adjusted combined diluted EPS of $3.84 in 2023, it will need to grow significantly throughout the year. It would mean to see that double-digit growth, the stock would need to see adjusted combined diluted EPS of at least $4.22 in 2024. That would mean hitting at least $1.06 in the first quarter.

So watch carefully. We aren’t out of the woods yet, but CP stock certainly looks like it will continue to perform as steady as a rail. Especially with earnings due out pre-market open.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends Canadian Pacific Kansas City. The Motley Fool has a disclosure policy.

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