Canadian Pacific Q2 Results Miss View; Lowers Full-year Outlook

(RTTNews) - Canada's second-largest railroad operator Canadian Pacific Railway Ltd. (CP, CP.TO) on Tuesday reported a 5 percent increase in profit for the second quarter from last year, as lower revenues were more than offset by a decline in expenses.

However, results for the quarter missed analysts' estimates and the company lowered its financial outlook for fiscal 2015. In a separate statement, Canadian Pacific said that Andrew Reardon was unanimously elected chairman of the board.

Hunter Harrison, Canadian Pacific's Chief Executive Officer said, "CP remains disciplined during this period of economic uncertainty in identifying opportunities to control costs and improve efficiency to offset near-term headwinds. CP's achievement on the bottom line came even as a sluggish North American recovery and stubborn global economic softness weighed on commodity prices, forcing producers to reduce output and cut shipments."

The Calgary, Canada-based company reported record second-quarter net income of C$390 million or C$2.36 per share, up from C$371 million or C$2.11 per share in the prior-year quarter.

Excluding items, adjusted net income for the quarter was C$404 million or C$2.45 per share, compared to last year's C$371 million or C$2.11 per share.

On average, 26 analysts polled by Thomson Reuters expected the company to report earnings of C$2.46 per share for the quarter. Analysts' estimates typically exclude one-time items.

Total revenues for the quarter declined 2 percent to C$1.65 billion from C$1.68 billion in the same quarter last year, and missed analysts' consensus estimate of C$1.68 billion.

Revenues from freight services decreased 2 percent from the prior-year quarter to C$1.61 billion, while non-freight revenues grew 5 percent to C$41 million.

Canadian Pacific's total revenue ton-miles or RTMs, for the quarter were 36.28 billion, down 6 percent from the year-ago quarter. However, total freight revenue per RTM grew 4 percent from last year to 4.44 cents.

Total carloads for the quarter declined 3 percent from the year-ago quarter to 668,000, while total freight revenue per carload increased 1 percent to $2,409.

Total operating expenses for the quarter were C$1.01 billion, down 7 percent from the prior-year quarter. Operating income rose 10 percent to C$646 million.

Operating ratio, a key efficiency measure, improved 420 basis points to 60.9 percent from 65.1 percent in the year-ago period.

Looking ahead to fiscal 2015, Canadian Pacific now forecasts adjusted earnings of C$10.00 to C$10.40 per share and revenue growth of 2 percent to 3 percent. Earlier, the company forecast full-year adjusted earnings per share growth of 25 percent or greater from 2014 and revenue growth of 7 percent to 8 percent.

The Street is currently looking for full-year earnings of C$10.44 per share on revenue growth of 4.4 percent to C$6.91 billion.

In a separate statement, Canadian Pacific said that Andrew Reardon has been unanimously elected chairman of the board. The resignations of Gary Colter and Krystyna Hoeg from the board was also unanimously accepted by the board.

Further, the board unanimously appointed Dr. Anthony Melman Chairman of the Finance Committee, replacing Reardon, and Rebecca MacDonald Chairman of the Corporate Governance and Nominating Committee, replacing Hoeg.

CP is currently trading at $158.58, down $0.14 or 0.09 percent on a volume of 0.45 million shares.

CP.TO is currently trading on the Toronto stock exchange at C$206.47, up $0.12 or 0.06 percent on a volume of 100,138 shares.