Canadian rail companies miss profit estimates

Canadian Pacific Railway Ltd. and rival Canadian National Railway Co. both missed Street estimates for quarterly profit on Tuesday due to lower freight volumes.

Canadian Pacific’s profitability decreased with the company’s operating ratio, a measure of operating expenses as a percentage of revenue and a key metric for Wall Street, rose to 58.2 per cent from 56.1 per cent a year earlier. A lower operating ratio signals profitability.

Canadian Pacific, however, said it expects at least midsingle-digit adjusted earnings per share growth in 2020.

“With Q4 volumes up eight per cent quarter to date and a strong outlook for the remainder of the year, we have raised our guidance to at least mid- single- digit adjusted diluted EPS growth,” Keith Creel, CP president, said in a statement.

The pandemic compounded woes for rail operators, which moved record amounts of Canadian oil at the start of this year but witnessed a plunge in crude volumes later due to production cuts by energy companies.

Canadian Pacific’s energy, chemicals and plastic shipments dropped 30 per cent during the third quarter.

Its total carloads, the amount of freight loaded into cars during a specified period, fell seven per cent.

Net income fell 3.2 per cent to $ 598 million, or $ 4.41 per share, in the three months ended Sept. 30. Revenue declined by about six per cent to $1.86 billion.

On an adjusted basis, Canadian Pacific earned $ 4.12 per share, missing an average Street estimate of $4.23, according to Refinitiv data.

Canadian National Railway Co blamed lower crude shipment during the COVID- 19 pandemic for missing analysts’ expectations.

The company’s operating ratio rose to 59.9 per cent from 57.9 per cent. However, grain and fertilizers carloads, the amount of freight loaded into cars during a specified period, rose 12 per cent in the quarter as reduced shipment of crude and consumer goods has freed up railway space, boosting movement of grains.

“As we look at the fourth quarter and beyond, we continue to see sequential improvements and momentum leading us to have a cautious optimism about the future” JJ Ruest, president of CN, said in a statement.