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Canadian Pacific (CP) Beats Q2 Earnings & Revenue Estimates

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Canadian Pacific (CP) Beats Q2 Earnings & Revenue Estimates

Solid freight revenues drive Canadian Pacific's (CP) results in Q2. However, deterioration in operating ratio is a concern.

Canadian Pacific Railway Limited CP posted better-than-expected earnings and revenues in second-quarter 2018, courtesy of higher shipments of key commodities.

The company’s earnings (excluding 9 cents from non-recurring items) of $2.45 per share (C$3.16) surpassed the Zacks Consensus Estimate of $2.40. Moreover, the bottom line improved 18.9% from the prior-year quarter.

Quarterly revenues increased 11.1% year over year to $1356.2 million (C$1.75 billion) and beat the Zacks Consensus Estimate of $1333.8 million. Freight revenues improved 7% year over year and accounted for 97.7% of the top line.

The impressive earnings results raised investors’ optimism on the stock, which inched up 1.1% in after-hour trading on Jul 18.

Canadian Pacific Railway Limited Price, Consensus and EPS Surprise

 

Canadian Pacific Railway Limited Price, Consensus and EPS Surprise | Canadian Pacific Railway Limited Quote

Notably, the company’s freight segment consists of Grain (up 2%), Coal (down 1%), Potash (up 6%), Fertilizers and sulfur (down 21%), Forest products (up 1%), Energy, chemicals and plastics (up 29%), Metals, minerals and consumer products (up 7%), Automotive (up 15%) and Intermodal (up 7%). In the reported quarter, total freight revenue per revenue ton-miles (RTMs) were up 2% year over year. Also, freight revenue per car load improved 5% from the year-ago quarter’s tally.

Operating income (on an adjusted basis) increased 2.6% in the quarter under review. Operating ratio (operating expenses, as a percentage of revenues, on an adjusted basis) came in at 64.2% compared with 62.8% in the prior-year quarter. Operating expenses rose 9% year over year.

Liquidity

This Zacks Rank #3 (Hold) company exited the quarter with cash and cash equivalents of C$51 million compared with C$338 million at the end of 2017. Long-term debt amounted to C$7936 million compared with C$7413 million in December 2017. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Canadian Pacific expects to maintain the impressive performance in the remaining quarters of 2018. The company will hold Investor Day meet during the Oct 3-4, 2018 period.

Upcoming Releases

Investors interested in the Zacks Rail industry are awaiting second-quarter earnings reports from railroad companies like Canadian National Railway Company CNI, Norfolk Southern Corporation NSC and Genesee & Wyoming Inc. GWR. Canadian National Railway Company will release results on Jul 24. Norfolk Southern and Genesee & Wyoming will announce the same on Jul 25 and Jul 27, respectively.

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