Canadian Pacific Q3 Profit Drops 20%, Misses Estimates

Canadian Pacific (CP) posted higher revenues, but lower profits, in the third quarter of 2021. The transcontinental railway profits were hit by higher fuel costs, and disappointing Canadian grain crops.

Revenue came in at C$1.94 billion in the third quarter of 2021, an increase of 4.3% from C$1.86 billion last year. Revenue missed analysts estimates by C$20 million.

Diluted EPS was C$0.70 in Q3 2021, a decrease of 20% from C$0.88 in Q3 2020.

On an adjusted basis, CP earned C$0.88 per share for the quarter, up 7.3% from C$0.82 last year. It missed analysts’ estimates by C$0.06.

The reported operating ratio (including Kansas City Southern acquisition-related costs) improved to 60.2% in the third quarter, from 58.2% last year. The adjusted operating ratio, which excludes costs related to the KCS acquisition, increased 120 basis points to 59.4%.

Canadian Pacific president and CEO Keith Creel said, “The third quarter presented challenges across the supply chain, but the CP team’s commitment to the foundations of precision scheduled railroading enabled us to respond quickly and effectively to changing environments.

“We are committed to controlling what we can control, as CP continues to focus on providing service excellence to our customers and driving value for our shareholders.”

CP now expects low single-digit volume growth in 2021, measured in revenue ton-miles, compared to 2020. CP remains confident it will post full-year double-digit adjusted diluted EPS growth in 2021. (See Insiders’ Hot Stocks on TipRanks)

On October 19, Raymond James analyst Steve Hansen maintained a Buy rating on CP, with a price target to C$98. This implies 6.7% upside potential.

Overall, consensus on the Street is that CP is a Moderate Buy, based on seven Buys and three Holds. The average Canadian Pacific price target of C$101.80 implies upside potential of about 10.8% to current levels.