CP reports record 2Q net income, elects Reardon chairman

Canadian Pacific Railway Ltd. announced its highest-ever net income for the second quarter and the lowest operating ratio for the period in the company’s history, as well as its second-lowest ratio ever.

Net income rose 12 percent to $390 million, or $2.36 per diluted share for the quarter compared with second-quarter 2014. Adjusted earnings per share increased 16 percent to $2.45. Revenue in the quarter slipped to $1.65 million from $1.68 million in the previous year’s quarter.

"CP remains disciplined during this period of economic uncertainty in identifying opportunities to control costs and improve efficiency to offset near-term headwinds," said CP Chief Executive Officer E. Hunter Harrison in a press release. "CP's achievement on the bottom line came even as a sluggish North American recovery and stubborn global economic softness weighed on commodity prices, forcing producers to reduce output and cut shipments."

The Class I’s operating income climbed 10 percent to $646 million; operating ratio fell to a second-quarter record 60.9, a 420-basis point improvement; and adjusted earnings per share increased 16 percent to $2.45. Operating expenses fell 8 percent to $1 billion, as compensation and benefits costs dropped 10 percent to $308 million and fuel costs plunged 32 percent to $185 million.

"Even in the face of this economic slowdown, CP's commitment to providing the best service at the lowest cost will continue to serve us well moving forward," Harrison said. "The positive CP story is based on a business model that allows for flexibility — we are nimble, efficient, and able to respond to the ever-changing economic climate."

According to its updated financial expectations for 2015, the company expects revenue growth to be 2 percent to 3 percent, the operating ratio to fall below 62 and annual adjusted earnings per share to total $10 to $10.40.

Also, the Class I announced that it would no longer be exempt from the regular Securities Exchange Commission reporting requirements in 2016 because a majority of its board was composed of U.S. citizens or residents as of June 30. The determination follows Stephen Tobias’ resignation from the board earlier this month.

Meanwhile, Andrew Reardon has been unanimously elected chairman of CP's board, the company announced this morning. Gary Colter and Krystyna Hoeg tendered their resignations from the board, which unanimously accepted those resignations.

The board unanimously appointed Anthony Melman chairman of the Finance Committee, replacing Reardon, and Rebecca MacDonald chairman of the Corporate Governance and Nominating Committee, replacing Hoeg.