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Canadian Pacific posts higher Q3 profit, revenue; operating ratio improves

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Canadian Pacific Railway Ltd. (TSE:CP), the nation's second-largest rail operators, rose in morning trades after posting higher third-quarter earnings and revenue, and reporting an improved operating ratio, a key measure of efficiency.

Shares advanced 2.3 percent to C$226.71 at 11:09 a.m. in Toronto, stretching this year's rally to 42 percent.

The railway's operating ratio improved 310 basis points to a record low 62.8 percent, the Calgary, Alberta-based company said in a statement today. The ratio expresses operating expenses as a percentage of revenue, so lower numbers are better.

Net income surged 23 percent to C$400 million, or C$2.31 a share. That result missed the C$2.38 average of analyst estimates. Revenue increased 8.9 percent to C$1.67 billion, short of the C$1.69 billion average estimate.

Stock-based compensation and benefits jumped more than fourfold to C$42 million in the period, Canadian Pacific said.

The company said on its website that it is “on track to finish the year with CP’s strongest quarter to date.”

CP Rail is working to deliver on a plan unveiled three weeks ago to more than double profit over four years in part by running longer and faster trains. 

Canadian Pacific said yesterday exploratory talks on a possible merger with U.S. railway CSX to form a transcontinental railroad have ended, while signaling it will keep pushing for consolidation.

CSX rejected an offer by Canadian Pacific to combine into a transcontinental railroad, Bloomberg reported earlier this month, citing people familiar with the matter. 

CP’s network stretches from Vancouver to Montreal and the populous U.S. Northeast. Canadian Pacific also has an extensive network in the U.S. Midwest, including at the major rail hub through Chicago.

CSX’s system also reaches Chicago and traverses much of the eastern United States from Florida to the U.S. border with Ontario.

Quick facts: Canadian Pacific Railway

Price: 287.09 CAD

TSX:CP
Market: TSX
Market Cap: $39.78 billion
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