(Adds analyst comment, conference call details, market
By Solarina Ho
TORONTO, July 17 Canadian Pacific Railway Ltd
reported stronger-than-expected results on Thursday, and
said rising freight volumes and prices should push already
record results to new highs later this year.
The shares of the Calgary-based railway, which have risen
some 20 percent since its last quarterly report, surged as much
as 4.7 percent on the news.
"I could more characterize the quarter as record after
record after record," Chief Executive Officer Hunter Harrison
told analysts. "Looking at the balance of 2014, we see strong
fundamentals on the demand side."
Growth in the burgeoning crude-by-rail business could
potentially ramp up to a train a day by the fourth quarter,
The results came even as North American railroads grappled
with the fall-out from one of the harshest winters in decades.
CP said rail congestion around Chicago and delays along the
Minneapolis/St. Paul corridor were still an issue.
CP and larger rival Canadian National Railway were
also under significant pressure during the first half of the
year to clear the backlog from a record grain harvest while
dealing with service disruptions caused by the winter weather.
Despite these challenges, Calgary-based CP said its
operating ratio improved by 680 basis points to 65.1 percent.
Operating ratio is a key measure of railroad efficiency. The
lower the number the better.
CEO Harrison, a rail veteran, has been orchestrating a major
turnaround at CP, a former industry laggard, and had promised to
squeeze the railway's operating ratio to 65 percent by mid-2016.
Harrison has since said 63 percent could be possible this year.
"While consensus moved lower in the last month due to grain
yield, operating and stock based compensation concerns,
operating results appear to have eclipsed the ... level
consensus moved from," Citigroup Global Markets analyst,
Christian Wetherbee, said in a note to clients.
The Calgary-based company reported net income of C$371
million ($345.24 million), or C$2.11 a share, up from C$252
million, or C$1.43 a share, a year earlier.
Profits were up even after the company recorded a roughly
C$30 million increase in stock-based compensation.
Record grain shipment volumes accounted for large chunk of
the railroad's 12 percent growth in revenue, which hit C$1.68
billion during the quarter.
Energy-related traffic, such as crude and sand used in oil
and gas fracking, was another source of substantial revenue
growth, CP said.
On average, analysts expected earnings of C$2.09 per share
and revenue of C$1.65 billion, according to Thomson Reuters
"Second-quarter performance was strong with continued
improvement in train length, train weight, fuel efficiency,"
said President Keith Creel, who also noted that accidents were
down 47 percent during the quarter.
Operating income rose by 40 percent, to C$587 million, and
operating expenses edged up 2 percent to C$1.09 billion.
($1 = 1.0746 Canadian dollars)
(Reporting by Solarina Ho, Editing by Franklin Paul and Lisa