Canadian Pacific Reports 20.7% Earnings Gain in Q4

Don MacKinnon/Bloomberg News

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Canadian Pacific Railway posted higher net income despite slightly softer revenue in the fourth quarter, the Class I freight railroad announced Jan. 28.

Calgary, Alberta-based Canadian Pacific saw quarterly net income surge 20.7% to C$802 million, or C$5.97 a share (USD$4.64) compared with C$664 million or C$4.84 (USD$3.76) a share in the same period last year.

For the entire year, the railroad’s income remained flat at C$2.44 billion or C$18.05 a share (USD$14.04) compared with C$2.44 billion or C$17.58 a share (USD$13.67) in 2019.

Quarterly revenue declined 2.7% to C$2.01 billion compared with nearly C$2.07 billion a year ago. For the entire year revenue declined 1.3% to C$7.71 billion compared with C$7.79 billion in 2019.

The railroad’s leadership said it was pleased with the company’s performance in the fourth quarter and for the year considering the economic turmoil caused by the COVID-19 pandemic in North America.

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“With a foundation of strong operational performance and a commitment to controlling what we can, the team continues to deliver,” CEO Keith Creel said. “Despite the continued COVID-19 impacts, volumes steadily improved over the second half of 2020, and we saw revenue-ton mile growth in the fourth quarter.”

Operating ratio moved to 53.9 from 57.0 a year ago. Operating ratio, or operating expenses as a percentage of revenue, is used to measure efficiency. The lower the ratio, the greater the company’s ability to generate profit.

“I’m proud to say that our 2020 full-year results, including from a safety perspective, exceeded our expectations, in what has been one of the most challenging years any of us have faced,” Creel said.

The railroad’s quarterly earnings were in line with Zacks Consensus Estimate.

As a result of the railroad’s strong quarterly results and the employees’ work during the pandemic, Canadian Pacific announced that nonexecutive employees received a one-time bonus that was paid Dec. 30.

The railroad ended the quarter with 7% fewer employees, shedding 832 positions during the last three months of the year to average 12,028 employees.

In part as a result of the bonuses, the railroad said the amount it spent on employee compensation and benefits increased 9% to C$433 million from C$396 million a year ago.

The average length of Canadian Pacific trains increased 11% in the fourth quarter to 8,207 feet — about 1½ miles — compared with 7,405 feet in 2019.

Trains also were 8% heavier, averaging 9,889 tons compared with 9,163 tons a year ago.

Because of the significantly lower price of diesel and operating more efficiently, Canadian Pacific said it saved 25%, or C$58 million in fuel as its cost dropped to C$169 million versus C$227 million a year ago.

Revenue increased in six sectors year-over year:

  • Automotive — 28% to C$109 million from C$85 million.
  • Fertilizer shipments — 14% to C$78 million from C$64 million.
  • Forest products — 9% to C$84 million from C$75 million.
  • Potash — 8% to C$103 million from C$95 million.
  • Grain shipments — 7% to C$508 million to C$473 million.
  • Intermodal shipments — 3% to C$410 million from C$400 million.

Revenue declined in three sectors:

  • Energy, chemical and plastic shipments — 25% to C$366 million from C$491 million.
  • Metals, minerals and consumer products — 18% to C$155 million from C$173 million.
  • Coal — 8% to C$155 million from C$168 million.

“We demonstrated exceptional resilience, we found unique ways to go after markets, and we generated momentum in volumes despite all the uncertainty,” Chief Marketing Officer John Brook said on a conference call with reporters and analysts. “Volumes steadily improved through the back half of the year, and I can tell you we finished the year strong and we’re carrying momentum into 2021.”

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