It has been about a month since the last earnings report for Canadian Pacific Railway Limited (CP - Free Report) . Shares have added about 2.4% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is CP due for a pullback? 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 catalysts.
Canadian Pacific reported lower-than-expected earnings and revenues in first-quarter 2018. The company’s earnings (excluding 23 cents from non-recurring items) of $2.13 per share (C$2.70) lagged the Zacks Consensus Estimate of $2.16. However, the bottom line improved 12.1% from the year-ago figure.
Quarterly revenues increased 8% year over year to $1,312 million (C$1.66 billion) but fell short of the Zacks Consensus Estimate of $1,313 million. Freight revenues, which improved 4% year over year, accounted for bulk (97.8%) of the top line.
Notably, the company's freight segment consists of Grain (down 9%), Coal (up 2%), Potash (up 14%), Sulfur and Fertilizer (up 3%), Forest products (down 1%), Energy, Chemicals and Plastics (up 13%), Metals, Minerals and Consumer products (up 8%), Automotive (down 7%) and Intermodal (up 13%). In the reported quarter, total freight revenues per revenue ton miles (RTMs) were down 2% year over year. Also, freight revenues per car load remained unchanged year over year.
Operating income (on an adjusted basis) slid 2.3% in the first quarter. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) came in at 67.5% compared with 65.6% a year ago. Operating expense rose 12.3% year over year.
The company exited the first quarter of 2018 with cash and cash equivalents of C$125 million compared with C$338 million at the end of 2017. Long-term debt totaled C$7,601 million compared with C$7,413 million in December 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been three revisions higher for the current quarter compared to four lower.
Canadian Pacific Railway Limited Price and Consensus
At this time, CP has a nice Growth Score of B, however its Momentum is doing a bit better with an A. However, 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.
Based on our scores, the stock is primarily suitable for momentum investors while also being suitable for those looking for growth and to a lesser degree value.
Estimates have been trending downward for the stock and the magnitude of these revisions looks promising. Interestingly, CP has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.