CP Railroad Cites Extreme Weather as Factor in 1Q Earnings
Canadian Pacific Railway Ltd. said its first-quarter net income and revenue surged, bolstered by gains in the freight sector.
For the period ended March 31, net income was up 25% to $434 million, or $3.09 diluted earnings per share, compared with $348 million, or $2.41 per share, in the same year-ago period.
CEO Keith Creel said the weather conditions and technology had an impact on performance.
“This past winter was one of the most challenging in my railroading career,” Creel said April 23 when the results were announced. “I applaud our employees for their resiliency in overcoming loss and pushing through extraordinary conditions and challenges throughout February and March.”
He added: “Our commitment to precision scheduled railroading enabled a strong recovery, and gives us a solid foundation moving forward.”
Revenue rose 6% to $1.77 billion from $1.66 billion in the same quarter the year before.
The Calgary, Alberta-based company is a transcontinental railway in Canada and the United States with direct links to major ports on the East and West coasts.
Freight revenue accounted for $1.73 billion, led by grain, intermodal and energy commodities. That compared with $1.63 billion in the same 2018 period.
Operating income also was up by 3% to $543 million from $540 million last year.
However, the railroad’s operating ratio worsened to 69.3 from 67.5 a year ago. Operating ratio, or operating expenses as a percentage of revenue, is a key industry metric used to measure efficiency. The lower the ratio, the greater the company’s ability to generate profit.
Creel
On a conference call with reporters and analysts, company officials said while pleased with the quarter’s results, they indicated there were significant weather challenges throughout their network which caused problems.
“The period saw one of the coldest winters in the century with temperatures 20% to 30% colder than what we experienced last year, the record freezing temperatures and snowfall affected supply chains across North America as well as the fluidity of our network,” Creel said. “I share all these comments not to make excuses, but rather just to share the facts that obviously had a bearing on these results that we’re sharing today. The challenges have been real and yes, they’ve been material to the quarter.”
He is not the first transportation executive recently to cite the difficult winter weather as a factor in company earnings.
READ MORE: J.B. Hunt earnings, revenue higher in 1Q, but miss Wall Street projections
J.B. Hunt earlier this month said a series of challenges caused its results to fall below expectations, including severe winter weather in a large portion of the country, especially the Midwest. “Volumes were affected by the expected rail lane closures and persistent severe winter-weather events impacting Chicago operations,” a statement from J.B. Hunt read.
Canadian Pacific, a Class 1 railroad, owns 12,500 miles of track across Canada from Montreal to Vancouver and as far north as Edmonton. In the United States it serves Minneapolis-St. Paul, Milwaukee, Detroit, Chicago and New York City.
