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

Railroad operator, Canadian Pacific Railway Limited (NYSE: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).

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. (NYSE: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 (NYSE:CPA) and ANA Holdings (OTC: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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