Canadian Pacific Railway Limited (NYSE:CP) reported better-than-expected earnings but lower-than-expected revenues in the second quarter of 2019.
The company’s earnings (excluding 65 cents from non-recurring items) of $3.21 per share (C$5.17) surpassed the Zacks Consensus Estimate of $3.19. Moreover, quarterly earnings increased more than 30% year over year. The bottom line was aided by the company’s prudent cost management, courtesy of the precision scheduled railroading model.
Quarterly revenues of $1,478 million (C$1.98 billion), however, fell short of the Zacks Consensus Estimate of $1,502.8 million. However, the top line expanded year over year. Impressive freight revenues led to the year over year top line improvement.
Freight revenues rose 13% year over year and contributed 97.7% to the top line. Notably, the company’s freight segment consists of Grain (up 13%), Coal (up 5%), Potash (up 17%), Fertilizers and sulfur (up 15%), Forest products (up 13%), Energy, chemicals and plastics (up 24%), Metals, minerals and consumer products (flat), Automotive (up 14%) and Intermodal (up 12%). In the reported quarter, total freight revenues per revenue ton-miles (RTMs) were up 7% year over year. Also, total freight revenues per car load increased 7% from the year-ago quarter’s figure.
Operating income increased 31% in the quarter under review. Operating expenses increased marginally year over year. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) improved to 58.4% from 64.2% in the prior-year quarter driven by this railroad operator’s efforts to control costs. Notably, lower the value of this key metric bodes well. Capital spending was C$683 million in the reported quarter.
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