Canadian Pacific (CP) reports quarterly earnings after hours. Analysts expect revenue of $1.28 billion and eps of $2.08. The revenue estimate implies 1% growth Y/Y. Investors should focus on the following key items:
Revenue Gains Coming Mostly From Two Products
If railroad traffic is supposed to be a harbinger for global economic activity then the global economy seems to be chugging along. For the first 15 weeks of 2018 North America rail traffic and intermodal volume were up 2.6% Y/Y. After quantitative easing ended in the second half of 2014 rail traffic slowed and Canadian Pacific lost pricing power. However, traffic never hit rock bottom and now growth has returned despite the absence of more QE.
For the most recent quarter CP’s revenue of CAD$1.7 billion was up 4% Y/Y. Carloads were up 5%, yet price per carload was practically flat.
Four of the company’s nine products experienced revenue growth, yet most of the gains came from Metals & Minerals (up 15%) and Energy & Chemicals (up 26%). Energy & Chemicals is now 15% of total revenue, up from 13% in the year earlier period. There has been a continued strength in Energy & Chemicals from refined petroleum products, and an increase in crude-by rail demand. Oil prices continue to astound, now hovering just below $70. North American shale plays are expanding the rig count and making money hand over fist. Read more: