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Canadian Pacific (CP) Lags Q3 Earnings, Sales; Stock Down

Zacks

Railroad operator, Canadian Pacific Railway Limited CP reported lower-than-expected earnings and revenues in the third quarter of 2016. The company’s earnings (on an adjusted basis) of C$2.73 per share (approximately $2.09 per share) fell short of the Zacks Consensus Estimate of $2.12. The bottom line, however, improved 1.46% from the year-ago figure.

Quarterly revenues declined 8.8% year over year to $1,191.7 million and also missed the Zacks Consensus Estimate of $1,244.5 million. Revenues were hurt by weak coal demand, delayed grain harvest and other headwinds. Carloads (volume) plunged 20% year over year and revenue ton-miles fell 6%. The lackluster earnings report disappointed investors. Consequently, the stock declined in the early trading session.

Operating expenses decreased 6% due to low fuel costs. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) came in at 57.7% as against 55.9% a year ago. The company now expects earnings per share to grow in mid-single digits in 2016 (the previous outlook had indicated double-digit earnings per share growth).

CDN PAC RLWY Price, Consensus and EPS Surprise


CDN PAC RLWY Price, Consensus and EPS Surprise | CDN PAC RLWY Quote

Liquidity

Canadian Pacific exited the third quarter with cash and cash equivalents of C$103 million as against C$650 million at the end of 2015. Long-term debt totaled C$8,488 million compared with C$8,927 million at the end of 2015.

Dividend and Share Repurchase

Earlier this year, Canadian Pacific scrapped its plans to buy Norfolk Southern Corp. NSC. Subsequently, Canadian Pacific raised its dividend per share by 43% to C$0.50 per share. The company’s board of directors also sanctioned a buyback plan of up to 6.91 million shares. The bid for the purpose has been completed last month.

Zacks Rank & Other Key Picks

Currently, Canadian Pacific has a Zacks Rank #3 (Hold). Some better-ranked stocks in the transportation space include Copa Holdings CPA and ANA Holdings ALNPY. While ANA Holdings carries a Zacks Rank #2 (Buy), Copa Holdings sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

For 2016, the Zacks Consensus Estimate for Copa Holdings has climbed 12 cents to $4.57 per share over the last month.

The earnings growth rate for ANA Holdings for the current year stands at a healthy 24.3%, much higher than the industry figure.

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