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Canadian Pacific (CP) Q1 Earnings Beat, Revenues Miss Mark

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Canadian Pacific Railway Limited’s (CP - Free Report) first-quarter 2021 earnings (excluding a penny from non-recurring items) of $3.54 (C$4.48) per share surpassed the Zacks Consensus Estimate of $3.47. Quarterly earnings increased 7.3% on a year-over-year basis due to low costs.

However, quarterly revenues of $1,547 million (C$1,959 million) missed the Zacks Consensus Estimate of $1,581.8 million. The top line was hurt by a decline in freight revenues.

Freight revenues, contributing 97.9% to the top line, fell 4.1% on a year-over-year basis. The company’s freight segment consists of Grain (up 7.2%), Coal (up 8.7%), Potash (down 9.8%), Fertilizers and sulphur (up 10%), Forest products (up 2.6%), Energy, chemicals and plastics (down 21%), Metals, minerals and consumer products (down 15.9%), Automotive (up 24.1%), and Intermodal (down 2.7%). In the reported quarter, total freight revenues per revenue ton-miles (RTMs) slipped 4% year over year. Total freight revenues per carload also declined 4% from the year-ago quarter’s reported figure.


Operating income dropped 6%, while operating expenses dipped 2% year over year in the quarter under review. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) deteriorated to 60.2% in the first quarter from 59.2% in the year-ago quarter. The downside was due to $33 million cost incurred in relation to its impending acquisition of Kansas City Southern (KSU - Free Report) . Notably, a lower value of the operating ratio bodes well.

Both Canadian Pacific and Kansas City Southern carry a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liquidity

The company exited the first quarter with cash and cash equivalents of C$360 million compared with C$247 million at the end of the first quarter of 2020. Long-term debt amounted to C$7,958 million compared with C$8,585 million at the end of December 2020.

2021 Guidance

Canadian Pacific anticipates adjusted earnings per share to increase in double-digits in 2021 compared with C$17.67 reported in 2020. Additionally, volumes, measured in RTMs, are expected to be in high single digits. Capital expenditures for the year are estimated at C$1.55 billion.

Sectorial Snapshot

Within the broader Transportation sector, Delta Air Lines (DAL - Free Report) and J.B. Hunt Transport Services (JBHT - Free Report) recently reported first-quarter 2021 results.

Delta, carrying a Zacks Rank #4 (Sell), incurred a loss (excluding $1.70 from non-recurring items) of $3.55 per share, wider than the Zacks Consensus Estimate of a loss of $3.08. Meanwhile, total revenues of $4,150 million topped the Zacks Consensus Estimate of $3,821.3 million.

J.B. Hunt, a Zacks #3-Ranked player, reported earnings of $1.37 per share, beating the Zacks Consensus Estimate of $1.18. Total operating revenues of $2,618.1 million also surpassed the Zacks Consensus Estimate of $2,486.9 million.

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