* Adjusted earnings per share C$1.91 vs estimated C$1.95
* Fourth-quarter revenue rises 7 pct to C$1.6 bln
* Operating ratio improves 890 basis points to 65.9 pct
* CP sees 2014 adjusted profit up 30 pct or more
* Sees revenue growth of 6-7 pct
(Updates with details on forecast, crude shipments, cash use,
and weather impact)
By Solarina Ho
TORONTO, Jan 29 Canadian Pacific Railway
, the country's second largest railroad, reported record
quarterly results on Wednesday despite taking a hit from extreme
winter weather in December.
The railroad also forecast its adjusted earnings would climb
by at least 30 percent in 2014 with revenue growing by 6-7
percent from 2013, estimates that some analysts said appeared
"CP's profitability improvement in 2013 has been nothing
short of spectacular," National Bank Financial analyst Cameron
Doerksen told clients.
Shares of the Calgary, Alberta-based railway jumped as much
as 8.3 percent on the Toronto Stock Exchange on Wednesday to a
record high of C$171.31, before closing at C$165.00.
"We closed the year out only 4 percent off of best in class
and second best in the industry," Chief Executive Hunter
Harrison told analysts during a conference call. "We have got
line of sight to be in best in class by the end of 2014."
CP Rail also said it would be making a decision soon on how
to deploy its cash. Analysts have speculated the company will
either increase its dividend or announce a share buyback, or
both, this year.
EXPANDING CRUDE BY RAIL
The company said freight revenue rose 7 percent in the
fourth quarter, bolstered by a jump in revenue from shipments of
industrial and consumer products, including crude oil.
Shipping crude via railroads has surged across North America
in the past few years as a boom in oil production has exceeded
pipeline capacity. But a series of disastrous train derailments
has put oil-by-rail under intense scrutiny as its safety is
CP said it moved 25,000 carloads of crude in the fourth
quarter for a total of 90,000 carloads for the year. It said it
was sticking with its forecast that it will be moving 140,000 to
210,000 carloads of crude oil a year by the end of 2015.
"We are online with our expansions in crude, but, at the
same time, I'd say that we are not going to be going as
quickly," said Chief Marketing Officer Jane O'Hagan. "There are
lots of things that we need to watch in that marketplace around
risk, around cars."
BMO analyst Fadi Chamoun said in a note that the railroad
performed well despite challenging weather conditions during the
quarter. He noted that CP improved its operating ratio by nearly
900 basis points in the quarter.
A railway's operating ratio shows the percentage of revenue
needed to maintain operations, and is a key measure of
efficiency. The lower the number the better.
The company said its adjusted operating ratio was a record
65.9 percent in the fourth quarter. It forecast its operating
ratio would be 65 percent or lower in 2014.
CP said it is hitting its long-term goals ahead of schedule
and CEO Harrison said the railroad could issue a new five-year
plan by the time it hosts an analysts' meeting sometime this
Harrison told analysts that 4,750 jobs have been cut since
he became CEO in 2012, and said the company would break the
5,000-plus mark by the end of this year, with 85 to 90 percent
coming from attrition.
"I am not a buyouter, okay? So some people learned that they
were waiting for something that wasn't going to come, so they
decided to move on," Harrison said.
CP Rail, which has one major labor contract to resolve this
year, also said that it had a pension surplus in 2013, reversing
an C$800 million ($721 million) deficit position in 2012.
CP Rail said poor weather during the last three weeks of
December hurt its results and cautioned that the weather
problems could continue.
"I don't know how bad this winter is going to be. I know if
this first quarter continues like it is, and I hope it is not,
we are going to have some catchup to do in the next three
quarters," Harrison said .
Net profit rose to C$82 million, or 47 Canadian cents a
share, in the quarter ended Dec. 31, from C$15 million, or 8
Canadian cents a share, a year earlier.
Excluding a pretax asset impairment charge of C$435 million
and other one-time items, the company earned C$1.91 a share.
Analysts had expected earnings of C$1.95 a share, according
to Thomson Reuters I/B/E/S.
Revenue was up 7 percent at C$1.6 billion.
(Additional reporting by Ashutosh Pandey in Bangalore; Editing
by Savio D'Souza and Peter Galloway)