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4/22/2020
Canadian Pacific yesterday reported record first-quarter revenue and a record-low operating ratio (OR), but updated its 2020 outlook to reflect the impact of the coronavirus pandemic.
CP's first-quarter 2020 revenue climbed 16 percent to CA$2.04 billion from CA$1.77 billion during the same period a year ago. The diluted earnings per share (EPS) fell 4 percent to $2.98 from $3.09; the adjusted EPS rose 58 percent to $4.42 from $2.79 percent.
The Class I improved its operating ratio to a Q1 record low of 59.2 percent. Operating income jumped 54 percent to CA$834 million from CA$543 million a year earlier.
CP's adjusted EPS beat analysts' consensus of $4.08. Also, the railroad performed better than its 60 percent OR guidance.
"These impressive Q1 2020 results are due to the efforts of our CP family, the leadership of talented management team and strict adherence to the foundations of our precision scheduled railroading model," said CP President and Chief Executive Officer Keith Creel in a press release.
Due to the impact of the pandemic on business operations and the broader economy, the Class I updated its outlook for the remainder of the year. Based on its current view of demand, CP now expects volume as measured in revenue ton miles to be down mid-single digits and adjusted diluted EPS to be flat year over year.
In spite of currency headwinds, CP officials are still budgeting capital expenditures of CA$1.6 billion, as the railroad makes use of the traffic slowdown to better position the network for the recovery.
CP's revised guidance assumes a Canadian-to-U.S. dollar exchange rate of 1.40, other components of net periodic benefit recovery to decrease by about CA$40 million versus 2019 and an effective tax rate of 25 percent.
"We had a tremendous start to 2020. Our operating team is tried and tested, and has shown exemplary leadership during a challenging period, including now managing the COVID-19 crisis," said Creel.
The operating model that produced record results during good times serves the company well during challenging times, he added.
"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," Creel said.