Canadian Pacific Railway Limited
), Canada's second largest railway, reported adjusted earnings
per share of C$1.24 (approximately $1.23) in the first quarter,
surpassing the Zacks Consensus Estimate of $1.18. Adjusted
earnings shot up 51.2% from C$0.82 per share (approximately
$0.81) in the year-ago quarter.
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Quarterly revenues climbed 8.7% year over year to C$1,495 million
(approximately $1,484 billion) and surpassed the Zacks Consensus
Estimate of $1,464 on volume expansion and strong pricing. The
demand for rail service remained healthy across all business
segments throughout the quarter.
Carloads (volume) remained flat at 659,000 units, while revenue
ton-miles (RTMs), which measure the relative weight and distance
of rail freight transported by Canadian Pacific rose 10% year
Operating income improved 32% year over year to C$362 million
(approximately $359 million). Operating expenses increased 3%
year over year to C$1,133 million (approximately $1,124 million).
Operating ratio (defined as operating expenses as a percentage of
revenue) improved 430 basis points year over year to 75.8%
because of continued focus on maintaining asset efficiencies,
safety measures and increased productivity.
Canadian Pacific exited the first quarter with cash and cash
equivalents of C$347 million (approximately $344.4 million), up
from C$77 million (approximately $76 million) in the year-ago
quarter. Long-term debt was reduced to C$4.590 billion
(approximately $4,555 million) from C$4.636 billion
(approximately $4.638 billion) in the year-end 2012.
We expect Canadian Pacific to deliver strong earnings growth
aided by improved volume and pricing. The company is expected to
benefit from its coal agreement with
Teck Resources Limited
) and draw synergies from its agreements with Canpotex and
Canadian Tire. Further, major commodities will also garner
favorable results for the company. Additionally, Canadian
Pacific's improving balance sheet position and regular returns to
shareholders in the form of dividends make it attractive for
Canadian Pacific operates with the likes of
Canadian National Railway Company
Union Pacific Corporation
) and has a Zacks Rank #2 (Buy rating).