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Canadian Pacific (CP) Q2 Earnings Lag, Revenues Beat Estimate

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Canadian Pacific Railway Limited’s (CP - Free Report) second-quarter 2021 earnings (excluding 67 cents from non-recurring items) of 84 cents (C$1.03) per share missed the Zacks Consensus Estimate of 86 cents. Quarterly earnings increased 42.4% on a year-over-year basis. Management stated that the company’s second-quarter results reflect the five-for-one share split that was approved by shareholders on Apr 21, 2021.

However, quarterly revenues of $1,672.1 million (C$2,054 million) surpassed the Zacks Consensus Estimate of $1,689.3 million.

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

 

The top line increased 29.3% on a year-over-year basis due to rise in freight revenues.

Freight revenues, contributing 97.8% to the top line, surged 15% on a year-over-year basis. The company’s freight segment consists of Grain (in-line with year-ago quarter’s reported figure), Coal (up 30%), Potash (down 8%), Fertilizers and sulphur (up 1%), Forest products (up 11%), Energy, chemicals and plastics (up 8%), Metals, minerals and consumer products (up 35%), Automotive (up 188%) as well as Intermodal (up 23%).

In the reported quarter, total freight revenues per revenue ton-miles (RTMs) rose 5% year over year. Total freight revenues per carload are almost in line with the year-ago quarter’s reported figure.

Operating income at Canadian Pacific, currently carrying a Zacks Rank #3 (Hold), moved up 6% and operating expenses surged 21% year over year in the quarter under review. Operating ratio (operating expenses as a percentage of revenues), on an adjusted basis) deteriorated to 55.3% in the second quarter from 57% in the year-ago quarter. Notably, a lower value of the operating ratio bodes well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liquidity

The company exited the second quarter with cash and cash equivalents of C$892 million compared with C$147 million at the end of 2020. Long-term debt amounted to C$7,850 million compared with C$8,585 million at the end of December 2020.

2021 Guidance

Canadian Pacific still anticipates adjusted earnings per share to increase in double-digits in 2021 compared with C$3.53 reported in 2020. Additionally, RTMs are expected to be in high-single digits. Capital expenditures for the year are estimated at C$1.55 billion. Effective tax rate is expected to be at 24.6%.

Sectorial Snapshot

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

Delta, carrying a Zacks Rank #3(Hold), incurred a loss (excluding $2.09 from non-recurring items) of $1.07 per share was narrower than the Zacks Consensus Estimate of a loss of $1.41. Revenues of $7,126 million were, however, substantially higher than the year-ago levels, buoyed by the recent uptick in air-travel demand. The metric also topped the Zacks Consensus Estimate of $6,340.9 million.

Kansas City Southern, carrying a Zacks Rank of 4(Sell), reported second-quarter 2021 earnings (excluding $6.23 from non-recurring items) of $2.06 per share missed the Zacks Consensus Estimate of $2.16. Quarterly revenues of $749.5 million surpassed the Zacks Consensus Estimate of $733.1 million and increased 36.8% year over year, driven by the 31% rise in overall carload volumes.

J.B. Hunt, a Zacks #3-Ranked player, reported better-than-expected second-quarter 2021 results. Quarterly earnings of $1.61 per share surpassed the Zacks Consensus Estimate of $1.55. Total operating revenues of $2908.4 million outperformed the Zacks Consensus Estimate of $2722 million and also jumped 35.5% year over year.