Canadian Pacific Railway on Tuesday, Oct. 21, 2014, announced record third-quarter net income of C$400 million (US$356.4 million), or C$2.31 (US$2.06) per diluted share, up from C$324 million or C$1.84 per diluted share, in the third quarter of 2013, an increase of 26% year-over-year.
Revenue rose 9% to a record C$1.67 billion (US$1.49 billion), while CP's operating ratio in the quarter fell to a record low 62.8%, an improvement of 310 basis points. Operating income rose 19% to C$621 million, also a record.
"The CP team delivered another quarter of impressive results," said CP CEO E. Hunter Harrison. "Going forward, we will continue to execute on our plan of delivering safe, superior service to our customers, focusing on further efficiency and capacity initiatives and building on our solid foundation for growth."
"Despite recent volatility in commodity prices, we are confident in the strength of the franchise and are on track to finish the year with CP's strongest quarter to date," Harrison said.
Shares of Canadian Pacific were down modestly in early Tuesday trading on the New York Stock Exchange. Said Cowen & Co. Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl, "3Q14 EPS of $2.31 was 26% higher than last year, but below our and consensus estimates of $2.40 and $2.39, respectively. Operating income increased 19% to $621 million, missing our and consensus estimates of $647 million and $649 million, respectively. Revenue grew 9% to $1.67 billion, below our and consensus estimates of $1.69 billion and $1.70 billion, respectively. The shares could come under pressure on [Oct. 21] as the company missed street expectations, which had been coming down over the past couple of weeks. That said, considering that the results were negatively impacted by higher stock-based compensation expenses associated with a 15% run in the share price during the quarter, any underperformance in the stock on [Oct. 21] may not be severe. Additionally, management's tone and outlook commentary on the earnings call should contribute to where the stock ends the day."