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Why Is Canadian Pacific (CP) Down 3.2% Since Last Earnings Report?
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It has been about a month since the last earnings report for Canadian Pacific (CP - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Canadian Pacific due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Q2 Earnings & Revenue Miss at Canadian Pacific
Canadian Pacific’s 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.
Moreover, quarterly revenues of $1,672.1 million (C$2,054 million) also missed the Zacks Consensus Estimate of $1,689.3 million. The top line, however, 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, 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 improved to 55.3% in the second quarter from 57% in the year-ago quarter. Notably, a lower value of the operating ratio bodes well.
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%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Canadian Pacific has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Canadian Pacific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Canadian Pacific (CP) Down 3.2% Since Last Earnings Report?
It has been about a month since the last earnings report for Canadian Pacific (CP - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Canadian Pacific due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Q2 Earnings & Revenue Miss at Canadian Pacific
Canadian Pacific’s 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.
Moreover, quarterly revenues of $1,672.1 million (C$2,054 million) also missed the Zacks Consensus Estimate of $1,689.3 million. The top line, however, 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, 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 improved to 55.3% in the second quarter from 57% in the year-ago quarter. Notably, a lower value of the operating ratio bodes well.
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%.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
At this time, Canadian Pacific has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Canadian Pacific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.