Canadian Pacific profit up 20%
Revenue rises 8%
Shares in Canadian Pacific Railway Ltd. jumped six per cent Wednesday as investors took in the first full quarter of results under the watch of CEO Hunter Harrison.
The Calgary-based railway posted a double-digit rise in third-quarter profits that beat analyst expectations and expressed optimism its labour woes are behind it, sending its stock to a record high of $93.91 during the session.
It closed at $93.18, up $5.29 or six per cent, on heavy volume on the Toronto Stock Exchange.
"Progress and momentum are both building," Harrison told a conference call to discuss the results.
"Overall I'm very, very pleased with where we are."
Net income for the three months ended Sept. 30 was $224 million, an increase of $37 million or 20 per cent from the year earlier.
Its diluted earnings per share were $1.30, up 18 per cent and revenue was up $110 million, or eight per cent, to $1.5 billion.
The profit beat analyst estimates by a penny a share and revenue was slightly above the consensus estimate compiled by Thomson Reuters.
On the call, Harrison said "there's been some very nice progress taking place on the labour front."
He said he's met with the Teamsters union representing track maintenance workers and he doesn't see a work stoppage coming.
"But having said that, we're prepared, in case I'm wrong, better than we've probably ever been."
Harrison said he's also encouraged that the railway reached a tentative agreement with the United Steelworkers, which represents 800 clerical and intermodal employees.
The only outstanding issue is with running trades workers, some 4,800 locomotive engineers, conductors, yardmen and others who walked off the job in May before Ottawa forced them back to work.
Harrison expects that to be resolved by an arbitrator in the new year.
It's the first full quarter at CP for Harrison who was brought in by a major CP shareholder to reform the company that traces its history back more than 120 years to the early years of Confederation.
Harrison was installed at the end of the second quarter after a hard-fought battle between Canadian Pacific's former board, led by former chairman John Cleghorn, and shareholders led by U.S. hedge fund manager Bill Ackman who was dissatisfied with CP's performance under former CEO Fred Green.
Harrison said his team has made significant progress in improving operations.
"We have implemented new services; closed terminals and certain yard operations; and we've put a new leadership team in place. The team has made significant progress on operational improvements, controlling costs and on delivering results. And this is just the beginning," he said in a release.
The company's operating ratio — a closely watched measure of how much revenue is required to run the business — improved to 74.1 per cent.
That's an improvement of 1.7 percentage points but still far from the levels that Harrison has targeted for Canadian Pacific, which has a rail system that spans Canada and the United States.