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Canadian Pacific (CP) Misses on Earnings & Revenues in Q4

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Canadian Pacific Railway Limited (CP - Free Report) reported lower-than-expected earnings and revenues in fourth-quarter 2017.

The company’s earnings (excluding $2.79 from non-recurring items) of $2.54 per share (C$3.22) were below the Zacks Consensus Estimate of $2.57. The figure excludes the income tax recovery of C$527 million from the recent U.S tax reform net of Canadian provincial tax rate increases. However, the bottom line improved 11.4% from the year-ago figure.

Quarterly revenues increased 10% year over year to $1,348.9 million (C$1,713) but fell short of the Zacks Consensus Estimate of $1,357.5 million. Freight revenues, which improved 4.4% year over year, accounted for bulk (97.3%) of the top line.

Notably, the company's freight segment consists of Grain (down 3%), Coal (up 1%), Potash (up 5%), Sulfur and Fertilizer (down 9%), Forest products (flat), Energy, Chemicals and Plastics (up 15%), Metals, Minerals and Consumer products (up 26%), Automotive (down 13%) and Intermodal (up 7%). In the reported quarter, total freight revenues per revenue ton miles (RTMs) were constant year over year. Also, freight revenues per car load remained unchanged year over year.

Operating income (on an adjusted basis) climbed 5% in the fourth quarter. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) came in at 56.1% compared with 56.2% a year ago.

Canadian Pacific Railway Limited Price, Consensus and EPS Surprise

 

Canadian Pacific Railway Limited Price, Consensus and EPS Surprise | Canadian Pacific Railway Limited Quote

2018 Forecast

While Canadian Pacific anticipates revenues to increase in mid-single digits for 2018, adjusted EPS is projected to rise in low double-digits. The company’s predictions for 2018 adjusted EPS are on the basis of C$11.39 — the adjusted EPS achieved in 2017.

Furthermore, the company expects effective tax rate in 2018 to lie between 24.5% and 25%. With the company’s continued investments in service, productivity and safety, it plans to invest $1.35-$1.5 billion in capital programs in the current year.

Liquidity

This Zacks Rank #3 (Hold) company exited the final quarter of 2017 with cash and cash equivalents of C$338 million compared with C$164 million at the end of 2016. Long-term debt totaled C$7,413 million compared with C$8,659 million in December 2016. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Upcoming Releases

Investors interested in the railroad space are keenly awaiting fourth-quarter quarter earnings reports from the key players like Canadian National Railway Company (CNI - Free Report) , Union Pacific Corporation (UNP - Free Report) and Norfolk Southern Corporation (NSC - Free Report) . While Canadian National Railway is scheduled to report fourth-quarter results on Jan 23, Norfolk Southern and Union Pacific will reveal the same on Jan 24 and Jan 25, respectively.

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