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Canadian Pacific Railway Ltd CP

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Morningstar’s Analysis

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Canadian Pacific’s Q3 Carloads Decline on Grain and Automotive Weakness, but EPS Outlook Reiterated

Matthew Young, CFA Equity Analyst

Analyst Note

| Matthew Young, CFA |

Wide-moat rail Canadian Pacific’s third-quarter revenue grew 7% year over year, excluding foreign exchange, driven by core yield improvement and higher fuel surcharges. Growth came in below our expected run rate on lower-than-anticipated volume gains. Total carload volume was up only about 1% versus the 15% increase last quarter on softer automotive carloads linked to the semiconductor shortage, reduced Canadian grain volumes resulting from drought conditions, and lower potash activity (network disruptions from wildfires and mine closures). That said, underlying industrial sector and intermodal demand remain healthy, and coal ticked up nicely. Management now expects low-single-digit volume growth for full-year 2021 from high single digits previously.

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Company Profile

Business Description

Canadian Pacific is a CAD 7.7 billion railroad operating on 12,500 miles of track across most of Canada and into parts of the Midwestern and Northeastern United States. It is the second-smallest Class I railroad by revenue and route miles. In 2020, CP hauled shipments of grain (24% of freight revenue), intermodal containers (21%), energy products (like crude and frac sand), chemicals, and plastics (20%) coal (8%), fertilizer and potash (10%), automotive products (4%), and a diverse mix of other merchandise.

Contact
7550 Ogden Dale Road S.E.
Calgary, AB, T2C 4X9, Canada
T +1 403 319-3591
Sector Industrials
Industry Railroads
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 12,262

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