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4/22/2021
Canadian Pacific yesterday reported first-quarter 2021 revenue declined to CA$1.96 billion from CA$2.04 billion a year ago, while net income climbed to CA$602 million from CA$409 million.
The Class I posted adjusted earnings per share (EPS) of CA$4.48, up 1% from CA$4.42 a year ago. Operating income declined to CA$780 million CA$834 million in the previous year’s quarter.
CP’s operating ratio (OR) in Q1 rose to 60.2% from 59.2% a year ago. The company attributed the increase to a CA$33 million expense related to its proposed acquisition of Kansas City Southern. The adjusted OR improved 70 basis points to 58.5% in the quarter.
CP also logged carload, revenue and tonnage records in Q1, including record tonnage, volumes and revenue in Canadian grain; record revenue in automotive; and record revenue and volumes in domestic intermodal.
“The strong demand environment, particularly across bulk, merchandise and domestic intermodal, coupled with our commitment to the foundations of precision scheduled railroading enabled our success in the first quarter," said President and Chief Executive Officer Keith Creel in a press release. "The CP family demonstrated resiliency through winter and delivered a record March.”
The momentum at the end of Q1 enabled a “strong start” to the second quarter, Creel said.
“We are excited about the unique opportunities ahead in 2021 and the strong base demand environment,” he added.
CP’s full-year guidance — which does not include potential impacts from the proposed KCS acquisition — calls for double digit adjusted diluted EPS growth relative to 2020's adjusted diluted EPS of CA$17.67; high-single digit volume growth, as measured in revenue ton miles; and capital expenditures of CA$1.55 billion.
During a call with analysts yesterday, Creel also offered comments on rival CN’s unsolicited bid for KCS, which the Class I announced on Monday. CN proposed combining with KCS in a cash-and-stock transaction valued at $33.7 billion, or $325 per share. The offer comes weeks after CP and KCS announced they had entered a merger agreement in which CP would acquire KCS stock in a cash transaction worth $29 billion, including about $3.8 billion of outstanding KCS debt.
Creel described CN’s proposal as "anti-competitive" and the value of its offer as unattainable.
“It’s fantasy money. It’s fools gold,” he said, according to a transcript of his comments. In response to an analyst’s question, Creel said CP is not considering raising its initial bid for KCS.