Railroad operator Canadian Pacific Railway LimitedCP reported lower-than-expected earnings and revenues in the first quarter of 2016. The company's earnings (on an adjusted basis) of C$2.50 per share (approximately $1.82 per share) fell short of the Zacks Consensus Estimate by a penny. Earnings also fell shy of the year-ago figure of $1.85 per share.
Quarterly revenues declined year over year to $1,160 million and also missed the Zacks Consensus Estimate of $1,242 million. Revenues were hurt by weak coal demand. Carloads (volume) decreased 4% year over year and revenue ton-miles fell 5%.
Operating expenses contracted 11% on the back of low fuel costs. Operating ratio (defined as operating expenses as a percentage of revenues) improved 430 basis points to 58.9% due to continued focus on asset efficiency, safety measures and productivity improvement.
Canadian Pacific exited the first quarter with cash and cash equivalents of C$571 million compared with C$650 million at the end of 2015. Long-term debt totaled C$8,430 million compared with C$8,927 million at the end of 2015.
Dividend and Share Repurchase
Canadian Pacific recently scrapped its plans to buy peer Norfolk Southern Corp. NSC . Subsequently, CEO Hunter Harrison stated that the company might use the cash, which was to be utilized for the Norfolk Southern takeover, toward shareholder friendly measures like a buyback/dividend raise or both. In keeping with his comments, Canadian Pacific raised its dividend per share by 43% to C$0.50 per share. The company's board of directors also sanctioned a buyback plan of up to 6.91 million shares.
Zacks Rank & Other Key Picks
Currently, Canadian Pacific sports a Zacks Rank #1 (Strong Buy). Other favorably ranked stocks in the transportation sector are China Eastern Airlines Corp. Ltd. CEA and International Consolidated Airlines Group, S.A ICAGY with a Zacks Rank #1.
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