Back to top

Analyst Blog

Canadian Pacific Railway Limited (CP - Analyst Report), Canada’s second largest railway carrier, reported adjusted earnings per share of C$1.88 (approximately $1.82) in the third quarter of 2013, beating the Zacks Consensus Estimate of $1.68. The results improved 45% from C$1.30 per share (approximately $1.31) in the year-ago quarter. Shareholders reacted positively to the news as the stock gained 9.19% in Wednesday trade on Nasdaq.

Quarterly revenues climbed 5.7% year over year to C$1,534 million (approximately $1,476 billion) but fell short of the Zacks Consensus Estimate of $1,499. The demand for rail service remained healthy across most of the business segments resulting in year-over-year growth.

Carloads (volume) decreased 2% year over year, while revenue ton-miles (RTMs), which measure the relative weight and distance of rail freight transported by Canadian Pacific, grew 2% year over year.

Operating income improved 39.4% year over year to C$524 million (approximately $504.2 million). Operating expenses increased 6% year over year to C$1,010 million (approximately $972 million). Operating ratio (defined as operating expenses as a percentage of revenues) improved 820 basis points year over year to 65.8% on continued focus on maintaining asset efficiencies, safety measures and productivity increase.

Liquidity

Canadian Pacific exited the third quarter with cash and cash equivalents of C$329 million (approximately $316.6 million), down from C$333 million (approximately $336 million) at the end of 2012. Long-term debt decreased to C$4.591 billion (approximately $4.418 billion) from C$4.636 billion (approximately $4.681 billion) at year-end 2012.

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 Ltd (TCK - Snapshot Report) and draw synergies from its agreements with Canpotex and Canadian Tire. Further, focus on volume expansion, operational efficiency, pricing revision and network capability upgrade bode well for the company.

However, a weak coal business, commodity risks related to purchase of diesel fuel and competition from other Canadian and U.S. companies are headwinds to the company’s performance.

Canadian Pacific operates with the likes of Canadian National Railway Company (CNI - Analyst Report) and Union Pacific Corp. (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%