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Canadian Pacific (CP) Q4 Earnings Beat Estimates, Rise Y/Y

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Shares of Canadian Pacific Railway Limited CP closed yesterday’s trading session 1% higher following its outperformance in fourth-quarter 2019 results.

The company’s earnings (excluding 4 cents from non-recurring items) of $3.61 per share (C$4.77) surpassed the Zacks Consensus Estimate of $3.55. Quarterly earnings also increased 5% year over year despite higher operating expenses.
Quarterly revenues of $1,567.6 million (C$2.07 billion) surpassed the Zacks Consensus Estimate of $1,551.5 million. The top line also inched up 3% year over year on rise in freight revenues.

Freight revenues rose 3.1% year over year and contributed 97.8% to the top line. Notably, the company’s freight segment consists of Grain (up 4%), Coal (down 10%), Potash (down 26%), Fertilizers and sulfur (down 11%), Forest products (up 3%), Energy, chemicals and plastics (up 33%), Metals, minerals and consumer products (down 14%), Automotive (up 13%) and Intermodal (down 1%). In the reported quarter, total freight revenues per revenue ton-miles (RTMs) were up 6% year over year. Also, total freight revenues per carload climbed 4% from the year-ago reported figure.

Operating income inched up 1.8% in the quarter under review. Operating expenses climbed 4% year over year. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) deteriorated to 57% from 56.5% in the prior-year quarter. Notably, lower value of this key metric bodes well. Capital spending during 2019 was C$1.65 billion.

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


This Zacks Rank #3 (Hold) company exited the fourth quarter with cash and cash equivalents of C$133 million compared with C$61 million at the end of 2018. Long-term debt amounted to C$8.16 billion compared with C$8.19 billion in December 2018.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2020 Outlook

The company anticipates its 2020 adjusted earnings per share to increase in the high single-digit to low double-digit range from C$16.44 reported in 2019. Volume growth (measured by revenue ton miles) is expected in mid-single digits. Capital expenditures are estimated at $1.6 billion.

Upcoming Releases

Investors interested in the broader Transportation sector are keenly awaiting fourth-quarter earnings reports from key players, such as Old Dominion Freight Line, Inc. ODFL, Air Lease Corporation AL and Copa Holdings, S.A. (CPA - Free Report) . While Old Dominion will release earnings numbers on Feb 6, Copa and Air Lease will announce the same on Feb 12 and Feb 14, respectively.

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