- ‘The market has turned much more positive,’ CEO Harrison says
- Profit beats estimates on cost cuts amid rail freight slump
Canadian Pacific Railway Ltd. rose the most since April after Chief Executive Officer Hunter Harrison indicated that freight demand has hit a bottom.
Cargo volume -- grain especially, for which a record Canadian crop is expected -- will rebound the remainder of this year, Harrison said on a conference call Wednesday.
“The market has turned much more positive,” he said after the company reported second-quarter earnings that topped analysts’ estimates. “We see improvements in the second half everywhere, except crude.”
Like major peers across North America, Canada’s second-largest railroad is responding to shrinking volume by parking locomotives and reducing staff. Freight in the second quarter declined the most since 2009, according to data from the American Association of Railroads.
Canadian Pacific also struggled in the quarter with a stronger Canadian dollar and wildfires in northern Alberta that disrupted production of crude oil. Revenue from crude shipments fell 72 percent adjusted for currency-exchange rates, the company said. Sales dropped 22 percent from Canadian grain and 12 percent from coal. One of the few bright spots was forest products, for which revenue increased 11 percent.
Adjusted earnings fell to C$2.05 a share, Calgary-based Canadian Pacific said in a statement. That exceeded the C$2.01 average of analyst estimates compiled by Bloomberg. Revenue declined 12 percent to C$1.45 billion ($1.11 billion), in line with the C$1.46 billion estimate.
Canadian Pacific advanced 4.5 percent to C$194.34 at 2:58 p.m. in Toronto after climbing 4.8 percent, the biggest intraday gain since April 13. The shares rose 5.2 percent this year through Tuesday.
Operating ratio, a widely watched measure of railroad productivity that compares expenses to sales, deteriorated to 62 percent from 60.9 percent a year earlier, matching the railroad’s forecast last month.
Canadian Pacific made formal the widely anticipated decision that Chief Operating Officer Keith Creel will replace Harrison, 71, as CEO next July. Creel, 48, who is also the carrier’s president, took over temporarily last year while Harrison recovered from leg surgery. Harrison, who was brought in from retirement in 2012 by billionaire investor Bill Ackman to run Canadian Pacific, has a three-year consulting agreement after stepping down.