Investors anticipate CP Rail forecast boost

Strong volume growth prospects for the second half of 2018

MONTREAL— Canadian Pacific Railway Ltd. jumped to a onemonth high after signalling that continued strong demand for commodities could boost the carrier’s full-year targets.

Robust traffic for oil, chemicals and grain helped propel second-quarter revenue for Canada’s No. 2 railroad beyond analysts’ estimates.

The company also won contracts to move sand and consumer cargo as rival Canadian National Railway Co. grappled with network bottlenecks.

While Canadian Pacific stuck to its goal of logging a midsingle-digit revenue increase this year, chief executive officer Keith Creel opened the door to revisiting the target.

Railroads throughout North America are gaining from strong freight demand and the chance to take market share from truckers, who are raising prices amid tight capacity.

Targets for 2018 have “potential upside in light of its strong volume growth prospects” in the second half, said Benoit Poirier, an analyst at Desjardins Capital Markets, in a note to clients Thursday.

He raised his 12-month target on Canadian Pacific to $274 from $259.

“Management is taking a conservative stance on guidance despite positive results since the beginning of the year,” he said.

Creel said he preferred a “prudent approach” to adjusting forecasts.

“Let’s get a little closer into the third quarter,” he said on a conference call Wednesday evening after the Calgary-based railroad posted earnings.

“Let’s see what the grain crop is going to do.”

Adjusted profit rose to $3.16 a share in the second quarter, Canadian Pacific said in a statement, exceeding the $3.09 estimated by analysts.

Sales climbed 6.5 per cent to $1.75 billion ($1.33 billion), while analysts predicted $1.73 billion.