Canadian Pacific (CP) Misses on Q4 Earnings & Revenues
Canada's leading railway operator Canadian Pacific Railway Limited CP reported earnings per share (EPS) of C$2.08 ($1.50) in the fourth quarter of 2015, down from C$2.63 ($2.32) recorded in the year-ago quarter. Adjusted EPS of C$2.72 ($1.96) also missed the Zacks Consensus Estimate of $2.03.
Quarterly revenues fell 4.4% year over year to C$1,687 million ($1,218 million) and lagged the Zacks Consensus Estimate of $1,294 million. Revenues were hurt by weaker coal demand. Carloads (volume) decreased 6% year over year and revenue ton-miles fell 7%.
Operating income dipped 4.4% year over year to C$677 million ($488.8 million). Meanwhile, operating expenses declined 8.9%. Operating ratio (defined as operating expenses as a percentage of revenues) was flat at 59.8% on continued focus on asset efficiency, safety measures and productivity improvement.
Liquidity
Canadian Pacific exited the fourth quarter with cash and cash equivalents of C$650 million ($469.3 million) compared with C$226 million ($173 million) at the end of 2014. Long-term debt totaled C$8,927 million compared with C$5,625 million at the end of 2014.
Guidance
Canadian Pacific expects operating ratio in 2016 to remain below 59%, while incurring capital expenditure of $1.1 billion. The company also believes that it will generate double-digit EPS growth in 2016, higher than that in 2015, while adjusted EPS is expected to be $10.10.
Zacks Rank & Key Picks
Currently, Canadian Pacific has a Zacks Rank #3 (Hold). Better-ranked transportation stocks include American Airlines Group AAL, Delta Air Lines Inc. DAL and Alaska Air Group, Inc. ALK. All three stocks sport a Zacks Rank #1 (Strong Buy).
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