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Canadian Pacific (CP) Up 9.6% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Canadian Pacific (CP - Free Report) . Shares have added about 9.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Canadian Pacific due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Q1 Earnings Beat at Canadian Pacific
Canadian Pacific’s earnings (excluding a penny from non-recurring items) of $3.54 (C$4.48) per share surpassed the Zacks Consensus Estimate of $3.47. Quarterly earnings increased 7.3% on a year-over-year basis due to low costs.
However, quarterly revenues of $1,547 million (C$1,959 million) missed the Zacks Consensus Estimate of $1,581.8 million. The top line was hurt by a decline in freight revenues.
Freight revenues, contributing 97.9% to the top line, fell 4.1% on a year-over-year basis. The company’s freight segment consists of Grain (up 7.2%), Coal (up 8.7%), Potash (down 9.8%), Fertilizers and sulphur (up 10%), Forest products (up 2.6%), Energy, chemicals and plastics (down 21%), Metals, minerals and consumer products (down 15.9%), Automotive (up 24.1%), and Intermodal (down 2.7%). In the reported quarter, total freight revenues per revenue ton-miles (RTMs) slipped 4% year over year. Total freight revenues per carload also declined 4% from the year-ago quarter’s reported figure.
Operating income dropped 6%, while operating expenses dipped 2% year over year in the quarter under review. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) deteriorated to 60.2% in the first quarter from 59.2% in the year-ago quarter. The downside was due to $33 million cost incurred in relation to its impending acquisition of Kansas City Southern . Notably, a lower value of the operating ratio bodes well.
Liquidity
The company exited the first quarter with cash and cash equivalents of C$360 million compared with C$247 million at the end of the first quarter of 2020. Long-term debt amounted to C$7,958 million compared with C$8,585 million at the end of December 2020.
2021 Guidance
Canadian Pacific anticipates adjusted earnings per share to increase in double-digits in 2021 compared with C$17.67 reported in 2020. Additionally, volumes, measured in RTMs, are expected to be in high single digits. Capital expenditures for the year are estimated at C$1.55 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Canadian Pacific has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Canadian Pacific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Canadian Pacific (CP) Up 9.6% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Canadian Pacific (CP - Free Report) . Shares have added about 9.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Canadian Pacific due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Q1 Earnings Beat at Canadian Pacific
Canadian Pacific’s earnings (excluding a penny from non-recurring items) of $3.54 (C$4.48) per share surpassed the Zacks Consensus Estimate of $3.47. Quarterly earnings increased 7.3% on a year-over-year basis due to low costs.
However, quarterly revenues of $1,547 million (C$1,959 million) missed the Zacks Consensus Estimate of $1,581.8 million. The top line was hurt by a decline in freight revenues.
Freight revenues, contributing 97.9% to the top line, fell 4.1% on a year-over-year basis. The company’s freight segment consists of Grain (up 7.2%), Coal (up 8.7%), Potash (down 9.8%), Fertilizers and sulphur (up 10%), Forest products (up 2.6%), Energy, chemicals and plastics (down 21%), Metals, minerals and consumer products (down 15.9%), Automotive (up 24.1%), and Intermodal (down 2.7%). In the reported quarter, total freight revenues per revenue ton-miles (RTMs) slipped 4% year over year. Total freight revenues per carload also declined 4% from the year-ago quarter’s reported figure.
Operating income dropped 6%, while operating expenses dipped 2% year over year in the quarter under review. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) deteriorated to 60.2% in the first quarter from 59.2% in the year-ago quarter. The downside was due to $33 million cost incurred in relation to its impending acquisition of Kansas City Southern . Notably, a lower value of the operating ratio bodes well.
Liquidity
The company exited the first quarter with cash and cash equivalents of C$360 million compared with C$247 million at the end of the first quarter of 2020. Long-term debt amounted to C$7,958 million compared with C$8,585 million at the end of December 2020.
2021 Guidance
Canadian Pacific anticipates adjusted earnings per share to increase in double-digits in 2021 compared with C$17.67 reported in 2020. Additionally, volumes, measured in RTMs, are expected to be in high single digits. Capital expenditures for the year are estimated at C$1.55 billion.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
VGM Scores
At this time, Canadian Pacific has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Canadian Pacific has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.