Jeff Kauffman, a transportation and logistics analyst, believes that CPKC's acquisition of Kansas City Southern strategically positions them to capitalize on the nearshoring and onshoring trends in North America. While acknowledging potential risks from tariffs, Kauffman points to CPKC's extensive cross-border network and the company's ongoing operational improvements as key drivers of future growth.
Jeff Kauffman, a partner in transportation and logistics at Vertical Research Partners, believes that Canadian Pacific Kansas City Ltd. ( CPKC ) is well-positioned to capitalize on the growing trend of nearshoring and onshoring in North America, despite potential short-term risks associated with tariffs.
Kauffman points out that CPKC's acquisition of Kansas City Southern in December 2021 has given them a strategic advantage, as nearly 41% of their traffic is either cross-border between Canada and the US or between Mexico and the US. He acknowledges that tariffs were a significant point of contention during the previous Trump administration, leading to the signing of the United States-Mexico-Canada Agreement (USMCA) in 2020. Following the USMCA, trade between the three countries saw an impressive 20% growth over the subsequent three years. Kauffman suggests that the current administration's discussions about tariffs may be a tactic to initiate negotiations, similar to the strategy employed during the first Trump term. He believes that the US government is seeking safeguards against China's economic expansion, particularly efforts to circumvent Southeast Asian tariffs by utilizing Mexico and Canada as transit points. Additionally, he sees a desire for enhanced border security as a key objective.CPKC's recent financial performance demonstrates positive momentum. During the quarter, their net income surged by 18% to reach $1.2 billion, compared to $1.02 billion in the same period last year. Revenue also experienced a 3% increase, climbing to $3.87 billion from $3.78 billion a year earlier. Kauffman attributes this growth to CPKC's ongoing operational improvements following the integration of Kansas City Southern. He cites the recent expansion of a bridge over Laredo, a key cross-border route between Mexico and the US, as a prime example. This expansion will double CPKC's capacity to handle traffic along this corridor, resulting in longer trains, reduced crew requirements, faster network speeds, increased efficiency, and a decrease in personal injuries. The improved network is also expected to lead to a return of excess locomotives and assets to storage
CP Kansas City CPKC Transportation Logistics Tariffs North American Trade Nearshoring Onshoring USMCA Trade Growth Operational Improvements
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