Canadian Pacific Delivers Q1 Earnings Significantly Above Expectations

Adjusted first quarter EPS of $4.42 also easily beat the consensus of $4.08 and marked an impressive year-over-year gain of 59%.

Moreover, the company did better than its 60% operating ratio guidance, coming in at 59.2%; a company record for Q1.

“The same operating model that produced record results for CP during good times now serves us well during challenging economic times” commented CEO and President Keith Creel.

“The company is in a strong position from both a balance sheet and liquidity perspective, and as we navigate through this extraordinary period, we remain well-positioned not only to weather this storm, but to recover stronger on the other side.”

CP also updated its 2020 outlook, citing the ongoing impact of the COVID-19 pandemic to business operations and the economy.

Based on how demand currently appears, the company expects volume, as measured in revenue ton miles, to be down mid-single digits and adjusted diluted EPS to be roughly flat year over year.  

Despite currency headwinds, CP continues to expect capital expenditures of $1.6 billion as it takes advantage of available track time to “better position the network for recovery and support long-term shareholder returns.”

Following the report, RBC Capital’s Walter Spracklin reiterated his CP buy rating, telling investors “CP remains our favourite name in the rail space.”

He praised the company’s ‘solid’ quarter, writing “We have seen many companies pull 2020 guidance altogether – and we believe CP management’s willingness to provide new guidance is a testament to the resiliency inherent in CP’s operating model”.

Overall the stock scores a Moderate Buy consensus with 16 recent buy ratings vs 6 hold ratings and 1 sell rating. These analysts are predicting, on average, 23% upside potential from current levels. (See Canadian Pacific stock analysis on TipRanks).

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