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Freight Revenues Aid Canadian Pacific (CP), High Debt Ails
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We have recently updated a report on Canadian Pacific Railway Limited (CP - Free Report) .
The long-term expected earnings per share (three to five years) growth rate for Canadian Pacific is pegged at 9.2%. The stock has gained 10.4% in the past year compared with a 18.3% rally of the industry it belongs to.
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With a gradual recovery in freight-market conditions, freight revenues, contributing majority to the top line, increased 4.6% year over year in the first nine months of 2021. The upside can be attributed to an increase in freight revenues at key sub-groups. Evidently, freight revenues at the coal, fertlizer and sulphur, forest products, metals, minerals and consumer products and automotive sub-groups increased 19.6%, 7.1%,6.1%, 12.9% and 34.4%, respectively, in the first nine months of 2021. With freight conditions improving, freight revenues are likely to be high in the December quarter as well.
We are encouraged by the company’s decision to pay dividends, despite the current uncertainties. The company paid out dividends worth C$380 million in the first nine months of 2021, up 12.1% from the comparable period of 2020.
At the end of third-quarter 2021, Canadian Pacific had cash and cash equivalents of C$210 million, below its long-term debt (maturing within one year) of C$1,932 million. It indicates that the company does not have sufficient cash to meet its current debt obligations.
Total operating expenses have increased 8% to $3,581 year over year in the first nine months of 2021. The increase was mainly due to a 24% hike in fuel costs in the first nine months of the year. With fuel costs increasing as oil prices move north, operating expenses will likely be high in fourth-quarter 2021. This is expected to hurt the bottom line.
Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Landstar System, Inc. (LSTR - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .
The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio. Notably, adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% reported in the first nine months of 2020. In third-quarter 2021, the metric improved to 81.3% from 83.9%, a year ago.
The uptick in adjusted operating ratios is primarily driven by an increase in revenues in the Trucking, Logistics and Intermodal segments. Notably, the lower the value of the metric, the better. The stock has surged 39.4% in the past year. Knight-Swift sports a Zacks Rank #1.
The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and better freight market conditions in the United States.
LSTR’s top and the bottom line increased substantially in each quarter from third-quarter of 2020’s levels, owing to robust revenues generated from the primary segment — truck transportation. The stock has rallied 34.6% in the past year. Landstar carries a Zacks Rank #2 (Buy).
The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW benefits from higher pricing and volumes across most of its service lines. Total revenues rallied 42.4% year over year in the first nine months of 2021, with higher revenues across all the segments.
CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has increased negligibly in the past month. C.H. Robinson carries a Zacks Rank #2.
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Freight Revenues Aid Canadian Pacific (CP), High Debt Ails
We have recently updated a report on Canadian Pacific Railway Limited (CP - Free Report) .
The long-term expected earnings per share (three to five years) growth rate for Canadian Pacific is pegged at 9.2%. The stock has gained 10.4% in the past year compared with a 18.3% rally of the industry it belongs to.
With a gradual recovery in freight-market conditions, freight revenues, contributing majority to the top line, increased 4.6% year over year in the first nine months of 2021. The upside can be attributed to an increase in freight revenues at key sub-groups. Evidently, freight revenues at the coal, fertlizer and sulphur, forest products, metals, minerals and consumer products and automotive sub-groups increased 19.6%, 7.1%,6.1%, 12.9% and 34.4%, respectively, in the first nine months of 2021. With freight conditions improving, freight revenues are likely to be high in the December quarter as well.
We are encouraged by the company’s decision to pay dividends, despite the current uncertainties. The company paid out dividends worth C$380 million in the first nine months of 2021, up 12.1% from the comparable period of 2020.
At the end of third-quarter 2021, Canadian Pacific had cash and cash equivalents of C$210 million, below its long-term debt (maturing within one year) of C$1,932 million. It indicates that the company does not have sufficient cash to meet its current debt obligations.
Total operating expenses have increased 8% to $3,581 year over year in the first nine months of 2021. The increase was mainly due to a 24% hike in fuel costs in the first nine months of the year. With fuel costs increasing as oil prices move north, operating expenses will likely be high in fourth-quarter 2021. This is expected to hurt the bottom line.
Zacks Rank & Stocks to Consider
Canadian Pacific currently carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.
Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings Inc. (KNX - Free Report) , Landstar System, Inc. (LSTR - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .
The long-term expected earnings per share (three to five years) growth rate for Knight-Swift is pegged at 15%. KNX is benefitting from an improvement in the adjusted operating ratio. Notably, adjusted operating ratio improved to 82.8% in the first nine months of 2021 compared with 86.6% reported in the first nine months of 2020. In third-quarter 2021, the metric improved to 81.3% from 83.9%, a year ago.
The uptick in adjusted operating ratios is primarily driven by an increase in revenues in the Trucking, Logistics and Intermodal segments. Notably, the lower the value of the metric, the better. The stock has surged 39.4% in the past year. Knight-Swift sports a Zacks Rank #1.
The long-term expected earnings per share (three to five years) growth rate for Landstar is pegged at 12%. LSTR is benefitting from a gradual recovery in the economy and better freight market conditions in the United States.
LSTR’s top and the bottom line increased substantially in each quarter from third-quarter of 2020’s levels, owing to robust revenues generated from the primary segment — truck transportation. The stock has rallied 34.6% in the past year. Landstar carries a Zacks Rank #2 (Buy).
The long-term expected earnings per share (three to five years) growth rate for C.H. Robinson is pegged at 9%. CHRW benefits from higher pricing and volumes across most of its service lines. Total revenues rallied 42.4% year over year in the first nine months of 2021, with higher revenues across all the segments.
CHRW’s measures to reward its shareholders are encouraging. Driven by the tailwinds, the stock has increased negligibly in the past month. C.H. Robinson carries a Zacks Rank #2.