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Canadian Pacific (CP) Q2 Earnings Beat, Revenues Miss Mark

Maharathi Basu

Canadian Pacific Railway Limited CP reported better-than-expected earnings but lower-than-expected revenues in the second quarter of 2019.

The company’s earnings (excluding 65 cents from non-recurring items) of $3.21 per share (C$5.17) surpassed the Zacks Consensus Estimate of $3.19. Moreover, quarterly earnings increased more than 30% year over year. The bottom line was aided by the company’s prudent cost management, courtesy of the precision scheduled railroading model.

Quarterly revenues of $1,478 million (C$1.98 billion), however, fell short of the Zacks Consensus Estimate of $1,502.8 million. However, the top line expanded year over year. Impressive freight revenues led to the year over year top line improvement.

Freight revenues rose 13% year over year and contributed 97.7% to the top line. Notably, the company’s freight segment consists of Grain (up 13%), Coal (up 5%), Potash (up 17%), Fertilizers and sulfur (up 15%), Forest products (up 13%), Energy, chemicals and plastics (up 24%), Metals, minerals and consumer products (flat), Automotive (up 14%) and Intermodal (up 12%). In the reported quarter, total freight revenues per revenue ton-miles (RTMs) were up 7% year over year. Also, total freight revenues per car load increased 7% from the year-ago quarter’s figure.

Operating income increased 31% in the quarter under review. Operating expenses increased marginally year over year. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) improved to 58.4% from 64.2% in the prior-year quarter driven by this railroad operator’s efforts to control costs. Notably, lower the value of this key metric bodes well. Capital spending was C$683 million in the reported quarter.

Canadian Pacific Railway Limited Price, Consensus and EPS Surprise

 

Canadian Pacific Railway Limited Price, Consensus and EPS Surprise

Canadian Pacific Railway Limited price-consensus-eps-surprise-chart | Canadian Pacific Railway Limited Quote

Liquidity

This Zacks Rank #2 (Buy) company exited the second quarter with cash and cash equivalents of C$45 million compared with C$61 million at the end of 2018. Long-term debt amounted to C$8,266 million compared with C$8,190 million in December 2018. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Outlook

For full-year 2019, Canadian Pacific expects revenue ton mile (RTM) to increase between 4% and 5%. Moreover, earnings per share in the third and fourth quarters of 2019 are expected to increase in double digits. Capital expenditures are still projected around C$1.6 billion for the current year.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting second-quarter 2019 earnings reports from key players like Union Pacific Corp. UNP , Norfolk Southern Corp. NSC and United Parcel Service UPS. While Union Pacific will report second-quarter earnings on Jul 18, Norfolk Southern and UPS will announce the same on Jul 24.

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Canadian Pacific Railway Limited (CP) : Free Stock Analysis Report
 
Union Pacific Corporation (UNP) : Free Stock Analysis Report
 
Norfolk Southern Corporation (NSC) : Free Stock Analysis Report
 
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
 
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