CP Rail brushes off U.S.-China trade war
Share earnings jump 42% from year ago period
Pacific Railway Ltd. is playing down the potential negative impact on its operations from a trade war between the U.S. and China.
China accounts for 12 per cent of North American revenues, with direct business between the world’s two largest economies coming in at less than five per cent, analysts were told during a conference call Thursday about its third-quarter results.
“We’re just a business that’s getting tossed around a bit with this China connection being overemphasized in the marketplace,” said chief executive Keith Creel.
Chief marketing officer John Brooks said trade tensions and the imposition of hefty import tariffs by both sides have prompted international customers to start to pull forward some of their business. The impact is mainly felt from some Vancouver imports and U.S. grain exports from the Midwest.
“But outside of that, we’re pretty resilient in that space. And again, it’s a total percentage, it’s not giant numbers,” Brooks said.
Creel said the company aims to ramp up crude shipments over the next few months to a run rate of about 100,000 carloads a year as it looks to generate higher profits after posting record revenues and adjusted earnings in the third quarter.
CP Rail earned $622 million or $4.35 per diluted share for the quarter ended Sept. 30, compared with $510 million or 3.50 per share for the same period a year earlier.
Adjusted earnings rose to $589 million or a record $4.12 per diluted share, two cents better than it forecast earlier this month. The earnings marked a 42-per-cent leap from $2.90 per share or $422 million a year earlier, beating the expectations of analysts polled by Thomson Reuters Eikon.
The quarter showed the success of the railway’s operating model, stated CEO Keith Creel. “It was a record by almost every measure and sets us up well for the remainder of the year and beyond.”
Revenues grew 19 per cent to $1.9 billion from $1.6 billion, led by a 58-per-cent growth in currency-adjusted revenues for energy, chemicals and plastics.
The company reported a record-low quarterly operating ratio, which measures its efficiency, of 58.3 per cent, compared with 61 per cent a year earlier.
Creel said the railway foresees continued and sustainable growth across all lines of business.
“We have the foundational underpinnings, and the room to grow, in the weeks, months and years ahead,” he said in a news release.
CP Rail said it expects adjusted diluted earnings per share to grow more than 20 per cent this year, up from an earlier guidance of low double-digit growth.
Edward Jones analyst Dan Sherman recommended investors buy stock in the 137-year-old company, but cautioned that “trade disagreements with U.S. export partners may also affect the volume of shipments.”