Back to top

Analyst Blog

Canadian Pacific Railway Limited (CP - Analyst Report), Canada’s second largest railway, reported adjusted earnings per share of C$1.43 (approximately $1.39) in the second quarter, missing the Zacks Consensus Estimate of $1.45. Adjusted earnings improved a staggering 138% from 60 Canadian cents per share (approximately 59 cents) in the year-ago quarter.

Quarterly revenues climbed 10% year over year to C$1,497 million (approximately $1,463 billion) but fell short of the Zacks Consensus Estimate of $1,476. The demand for rail service remained healthy across most of the business segments resulting in year-over-year growth.

Carloads (volume) increased 3% year over year, while revenue ton-miles (RTMs), which measure the relative weight and distance of rail freight transported by Canadian Pacific, grew 11% year over year.  

Operating income improved 76% year over year to C$420 million (approximately $410.1 million). Operating expenses increased 4% year over year to C$1,077 million (approximately $1,053 million). Operating ratio (defined as operating expenses as a percentage of revenue) improved 1,060 basis points year over year to 71.9% on continued focus on maintaining asset efficiencies, safety measures and productivity increase.

Liquidity

Canadian Pacific exited the second quarter with cash and cash equivalents of C$442 million (approximately $432 million), up from C$82 million (approximately $81 million) in the year-ago quarter. Long-term debt increased to C$4.677 billion (approximately $4.849 billion) from C$4.636 billion (approximately $4.591 billion) in the year-end 2012.

Guidance

For 2013, the company expects revenue growth in the high-single digit range. Operating ratio is expected in the low 70s and earnings per share growth is expected to be over 40% compared to th year-ago level.

Our Analysis

We expect Canadian Pacific to deliver strong earnings growth aided by improved volume and pricing. The company is expected to benefit from its coal agreement with Teck Resources Limited (TCK - Snapshot Report) and draw synergies from its agreements with Canpotexand Canadian Tire. Further, major commodities will also garner favorable results for the company. Additionally, Canadian Pacific’s improving balance sheet position and regular returns to shareholders in the form of dividends make it attractive for investors.

Canadian Pacific operates with the likes of Canadian National Railway Company (CNI - Analyst Report) and Union Pacific Corporation (UNP - Analyst Report) and has a Zacks Rank #3 (Hold).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%