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Labor Issues Impact CP Railway’s Q2 Earnings, but Stock Up 1.7%

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CPR’s second-quarter earnings

Canada’s number two rail freight carrier, Canadian Pacific Railway, announced its second-quarter earnings on July 18 after the market closed. The railroad reported 3.16 Canadian dollars per share on an adjusted basis, surpassing analysts’ average estimate of 3.12 Canadian dollars per share by 1.3%. This Calgary-based railroad’s second-quarter adjusted EPS were up 14.1% from 2.77 Canadian dollars in the corresponding period of 2017. On a reported basis, CPR’s net earnings declined to 3.04 Canadian dollars per share in the second quarter from 3.27 Canadian dollars per share in Q2 2017 due to labor issues.

Yesterday, Canadian Pacific Railway’s shares opened at $186.83 and moved up slightly later. However, the stock went down to the same levels in the morning hours before touching the highest point of $189.6. The stock closed at $189.21, up 1.72% from July 17’s close of $186.0.

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Revenue and other stats

Canadian Pacific Railway’s revenue was 1.75 billion Canadian dollars in the second quarter, which beat analysts’ estimate by 1.1%. Revenue in that quarter jumped 6.5% YoY (year-over-year) from $1.6 billion Canadian dollars in the corresponding quarter last year. Higher shipments of grain and potash helped CP to increase its revenue-ton miles by 4% YoY in the second quarter and increase carload growth by 2% YoY.

The operating ratio, or operating margin, is an important metric in the railroad industry. Canadian Pacific Railway’s operating margin fell to 35.8% in Q2 2018 compared with 37.2% in the same period last year.

Management outlook

Canadian Pacific Railway’s president and CEO, Keith Creel, said, “Overall, it was a good quarter that sets the franchise up well for the remainder of 2018 and beyond. Our quarterly performance was impacted by service interruptions related to labor negotiations and strike notices…With labor stability in place, strong underlying network performance and a robust demand environment, the path are clear and the opportunities are many.”

Major US transportation (XTN) companies J.B. Hunt Transport (JBHT), Marten Transport (MRTN), and CSX (CSX) have reported their second-quarter earnings so far. Notably, all these companies have reported a rise in their second-quarter top lines driven by pricing gains and higher volumes.

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