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Canadian Pacific (CP) Q2 Earnings Lag, Revenues Beat Estimate

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Canadian Pacific Railway Limited’s CP second-quarter 2021 earnings (excluding 67 cents from non-recurring items) of 84 cents (C$1.03) per share missed the Zacks Consensus Estimate of 86 cents. Quarterly earnings increased 42.4% on a year-over-year basis. Management stated that the company’s second-quarter results reflect the five-for-one share split that was approved by shareholders on Apr 21, 2021.

However, quarterly revenues of $1,672.1 million (C$2,054 million) surpassed the Zacks Consensus Estimate of $1,689.3 million.

Canadian Pacific Railway Limited Price, Consensus and EPS Surprise

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

The top line increased 29.3% on a year-over-year basis due to rise in freight revenues.

Freight revenues, contributing 97.8% to the top line, surged 15% on a year-over-year basis. The company’s freight segment consists of Grain (in-line with year-ago quarter’s reported figure), Coal (up 30%), Potash (down 8%), Fertilizers and sulphur (up 1%), Forest products (up 11%), Energy, chemicals and plastics (up 8%), Metals, minerals and consumer products (up 35%), Automotive (up 188%) as well as Intermodal (up 23%).

In the reported quarter, total freight revenues per revenue ton-miles (RTMs) rose 5% year over year. Total freight revenues per carload are almost in line with the year-ago quarter’s reported figure.

Operating income at Canadian Pacific, currently carrying a Zacks Rank #3 (Hold), moved up 6% and operating expenses surged 21% year over year in the quarter under review. Operating ratio (operating expenses as a percentage of revenues), on an adjusted basis) deteriorated to 55.3% in the second quarter from 57% in the year-ago quarter. Notably, a lower value of the operating ratio bodes well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Liquidity

The company exited the second quarter with cash and cash equivalents of C$892 million compared with C$147 million at the end of 2020. Long-term debt amounted to C$7,850 million compared with C$8,585 million at the end of December 2020.

2021 Guidance

Canadian Pacific still anticipates adjusted earnings per share to increase in double-digits in 2021 compared with C$3.53 reported in 2020. Additionally, RTMs are expected to be in high-single digits. Capital expenditures for the year are estimated at C$1.55 billion. Effective tax rate is expected to be at 24.6%.

Sectorial Snapshot

Within the broader Transportation sector, Delta Air Lines DAL, J.B. Hunt Transport Services JBHT and Kansas City Southern KSU recently reported second-quarter 2021 results.

Delta, carrying a Zacks Rank #3(Hold), incurred a loss (excluding $2.09 from non-recurring items) of $1.07 per share was narrower than the Zacks Consensus Estimate of a loss of $1.41. Revenues of $7,126 million were, however, substantially higher than the year-ago levels, buoyed by the recent uptick in air-travel demand. The metric also topped the Zacks Consensus Estimate of $6,340.9 million.

Kansas City Southern, carrying a Zacks Rank of 4(Sell), reported second-quarter 2021 earnings (excluding $6.23 from non-recurring items) of $2.06 per share missed the Zacks Consensus Estimate of $2.16. Quarterly revenues of $749.5 million surpassed the Zacks Consensus Estimate of $733.1 million and increased 36.8% year over year, driven by the 31% rise in overall carload volumes.

J.B. Hunt, a Zacks #3-Ranked player, reported better-than-expected second-quarter 2021 results. Quarterly earnings of $1.61 per share surpassed the Zacks Consensus Estimate of $1.55. Total operating revenues of $2908.4 million outperformed the Zacks Consensus Estimate of $2722 million and also jumped 35.5% year over year.


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Canadian Pacific Railway Limited (CP) : Free Stock Analysis Report

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