It has been about a month since the last earnings report for Canadian Pacific (CP). Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Canadian Pacific due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Earnings Miss at Canadian Pacific in Q3
The company's earnings (excluding 18 cents from non-recurring items) of $3.15 per share (C$4.12) missed the Zacks Consensus Estimate of $3.16. The downtrend was primarily caused by escalating fuel prices and increased operating expenses. However, the bottom line improved 36.4% from the prior-year quarter's figure.
Quarterly revenues of $1452.3 million (C$1.9 billion) lagged the consensus estimate of $1466.1 million. Nevertheless, the top line improved 14.2% from the year-ago quarter's tally. Freight revenues improved 19.8% year over year and contributed 97.7% to the top line.
Notably, the company's freight segment consists of Grain (up 9%), Coal (up 4%), Potash (up 26%), Fertilizers and sulfur (up 6%), Forest products (up 13%), Energy, chemicals and plastics (up 63%), Metals, minerals and consumer products (up 8%), Automotive (up 25%) as well as Intermodal (up 19%). In the reported quarter, total freight revenue per revenue ton-miles (RTMs) were up 6% year over year. Also, freight revenue per car load improved 14% from the year-ago quarter's tally.
Operating income (on an adjusted basis) rallied 27% in the quarter under review. Operating ratio (operating expenses, as a percentage of revenues, on an adjusted basis) came in at 58.4% compared with 61% in the prior-year quarter. Operating expenses rose 13.9% year over year.
Liquidity
The company exited the quarter with cash and cash equivalents of C$150 million compared with C$338 million at the end of 2017. Long-term debt amounted to C$7806 million compared with C$7413 million in December 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
Currently, Canadian Pacific has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions looks promising. Notably, Canadian Pacific has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Canadian Pacific Railway Limited (CP): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
