Canada’s transportation sector is expected to grow steadily through 2030. According to a research report from Grand View Research, Canada’s logistics market is forecast to grow to $473.7 billion by 2030, indicating a compounded annual growth rate of 7.5%. Several other subsectors, such as warehousing, freight, and distribution, are also poised to expand in the next decade, making TSX transportation stocks the top investments right now. In this article, I have identified two Canadian transportation stocks to buy in 2025.
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Canadian Pacific Kansas City stock
Among the largest companies in North America, Canadian Pacific Kansas City (TSX:CP) has already created massive wealth for long-term shareholders. Since 2001, it has returned 2,410% to shareholders after adjusting for dividend reinvestments.
Canadian Pacific Kansas City delivered impressive fourth-quarter (Q4) results, capping off a successful first year as a combined company following its historic merger. The railroad reported revenue of $3.9 billion in Q4 of 2024, up 3% year over year, with volume growth of 2% and an operating ratio of 57.1%, representing a 160 basis-point improvement over the past 12 months.
Despite a challenging macro-environment, it expects earnings to grow between 12% and 15% year over year in 2025, supported by mid-single-digit volume increases.
The railroad’s unique north-south network connecting Canada, the U.S., and Mexico continues to drive synergies across multiple business segments. Particularly notable is CPKC’s automotive performance, which saw 16% revenue growth and 23% volume increase in Q4, earning the company GM’s Supplier of the Year recognition — a first for any railroad in 34 years.
Strategic investments are also enhancing CP’s network capacity, which includes the newly completed second span of the Laredo Bridge at the U.S.-Mexico border.
Priced at 22.5 times forward earnings, the TSX stock is not too expensive, given it is forecast to expand adjusted earnings from $4.25 per share in 2024 to $5.66 per share in 2026.
TFI International stock
TFI International (TSX:TFII) demonstrated resilient cash generation capabilities in its Q4 results despite facing headwinds from an industry-wide freight volume slump. The transportation and logistics company reported a free cash flow of $208 million for the quarter, bringing its full-year total to over $750 million, marking the third consecutive year of achieving this milestone.
TFI’s total revenue before fuel surcharge grew 9% year over year to $1.8 billion, benefiting from its strategic acquisition of Daseke last April. However, operating income declined to $160 million from $198 million in the prior year, resulting in an operating margin compression of 8.8% from 11.8%.
TFI’s LTL segment, representing 40% of segmented revenue, saw sales increase 10% to $737 million, though its adjusted operating ratio weakened to 90.3% from 86.1% a year earlier. The Truckload segment, bolstered by the Daseke acquisition, posted revenue of $693 million, up substantially from $399 million, while its Logistics segment experienced a revenue decline to $410 million from $472 million.
Management maintained its disciplined capital allocation strategy, reducing debt by $156 million to achieve a funded debt-to-EBITDA (earnings before interest, tax, depreciation, and amortization) ratio of 2.1 times, completing a bolt-on acquisition, increasing the quarterly dividend by 13% to $0.45 per share, and repurchasing $42.4 million worth of shares.
Analysts tracking the TSX stock expect earnings to expand from $5.75 per share in 2024 to $7.7 per share in 2026. Its free cash flow is also forecast to improve from $770 million in 2024 to $941 million in 2026. So, priced at 17 times forward earnings and 14 times forward FCF, TFI has significant upside potential.
The TSX transportation company also pays shareholders an annual dividend of $1.80 per share, translating to a yield of 2%. Notably, these payouts have more than tripled in the past decade.
