Canadian Pacific Railway Ltd. cut its profit target for the year, as revenue dropped for commodities such as oil and western Canada’s grain shipments fell behind schedule.
“Given the delayed grain harvest, lower crude volumes and persistent economic challenges compounded by a strengthening Canadian dollar, we are now expecting mid-single-digit EPS growth this year,” CEO Hunter Harrison said Wednesday in a statement. That marked a reduction from the previous forecast that earnings would increase at least 10 per cent from $10.10 last year.
Grain will be harvested later than expected after parts of Canada’s prairie provinces received three times the normal rainfall. Most of the crop will move early next year, Walter Spracklin, an analyst at RBC Capital Markets, said Oct. 11 in a note to clients.
Faced with an industry-wide decline in cargo volume, Canada’s second-largest railroad has reduced staff and parked locomotives. The Calgary-based carrier had 11,773 employees at the end of the third quarter, down 13 per cent from a year earlier.
The carrier issued the revised forecast as it reported third-quarter adjusted earnings rose to $2.73 a share. That fell short of the $2.79 average of analyst estimates compiled by Bloomberg. Revenue slid 9.1 per cent to $1.55-billion, compared with the $1.62-billion that had been predicted.
The railroad’s American Depositary Receipts fell 1.9 per cent to $150.54 at 9:51 a.m. in New York after dropping as much as 2.7 percent for the biggest intraday decline in more than a month.
Third-quarter revenue from Canadian grain, the company’s biggest business, fell 15 per cent to $222-million. Sales of metals, minerals and consumer products dropped 18 per cent to $142-million, while crude revenue plunged 88 per cent to $13 million.
Adjusted operating ratio, a measure of productivity that compares expenses to sales, improved to 57.7 per cent from 59.9 per cent, the company said.
Despite cutting its earnings forecast, Canadian Pacific “will deliver its lowest-ever annual operating ratio” this year, Mr. Harrison said.
Separately, the railroad named Nadeem Velani as its new chief financial officer. The former investor-relations chief had been serving as interim CFO since the departure of Mark Erceg for Tiffany & Co. last month.Report Typo/Error