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CP Rail's shares drop over 5% as company lowers full year guidance

CP Rail's shares drop over 5% as company lowers full year guidance
CP’s shares took a 5.5% hit this afternoon as it released its financial results for the second quarter

Canadian Pacific (TSE:CP) cut its revenue prospects from 2-3% rather than the 7-8% it had forecast last April. The cuts come even as the company reported earnings of C$2.45 a share in line with analysts’ expectations.

Still, CP’s shares took a 5.5% hit this afternoon as it released its financial results for the second quarter.

Net income actually rose 5% to C$390 million while revenue decreased 1.7% to C$1.65 billion.

The operating ratio improved to 60.9% from 65.1 percent a year earlier, but did not match rival Canadian National Railway, which reported an operating ratio of 56.4 percent.

The lower the operating ratio, defined as operating expenses as a percentage of revenue, the better. And for a railway company, which spends much of its revenues to maintain operations, it is a key measure. An operating ratio of 80 or lower is acceptable.

The railway also announced Tuesday that Andrew Reardon was unanimously elected Chairman of its Board of Directors in the wake of the resignations of the previous Chairman, Gary Colter and board member Krystyna Hoeg over a governance issue the company said.

Total carloads fell 3 percent in the quarter due to 25% and 8% lower grain shipments in the United States and Canada respectively. The crude-by-rail segment fell 24% but potash transport and coal rose by a respective 12% and 2%.

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