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Canadian Pacific (CP) Down 7.4% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Canadian Pacific (CP - Free Report) . Shares have lost about 7.4% 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 its most recent earnings report in order to get a better handle on the important drivers.

Q1 Earnings Miss at Canadian Pacific

Canadian Pacific’s earnings of 50 cents (C$0.63) per share missed the Zacks Consensus Estimate by 7 cents. The bottom line dipped 29.6% year over year. Results were hurt by lower freight revenues.

Total quarterly revenues of $1,451.1 million (C$1,838 million) underperformed the Zacks Consensus Estimate of $1,538.7 million. Lower freight revenues (down 6% year over year), mainly due to weakness in the Grain sub-group, resulted in the overall top line declining 6.2% year over year. This was because freight revenues accounted for bulk (97.7%) of the top line.

CP’s freight segment consists of Grain (down 20%), Coal (down15%), Potash (up 3%), Forest products (up 8%), Energy, chemicals and plastics (down 20%), Metals, minerals and consumer products (up 14%), Automotive (down 16%) as well as Intermodal (up 13%). Revenues at the Fertilizers and Sulphur sub-segment were flat year over year. In the reported quarter, total freight revenues per revenue ton-miles (RTMs) rose 13% year over year. Total freight revenues per carload increased 3% from the year-ago quarter’s reported figure. Total carloads declined 10%, mainly due to the 28% plunge in Grain carloads.

On a reported basis, operating income dropped 31.4% while total operating expenses increased 10.5% year over year in the quarter under review, mainly due to the 32.5% upsurge in fuel costs. Adjusted operating income decreased 31.7%.  The operating ratio deteriorated to 69.8% in the first quarter from 58.5% in the year-ago quarter. Lower the value of the metric, the better. Lower revenues and escalated expenses caused this dismal reading for the key metric.

Liquidity

Canadian Pacific exited the March quarter with cash and cash equivalents of C$85 million compared with C$69 million at the end of 2021. Long-term debt amounted to C$17,917 million compared with C$18,577 million at the end of 2021.


 

 

How Have Estimates Been Moving Since Then?

It turns out, estimates review flatlined during the past month.

VGM Scores

Currently, Canadian Pacific has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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