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CSAFE Global

 

PortMiami

CP 2Canadian Pacific Railway Limited announced third-quarter revenues of $1.94 billion, diluted earnings per share ("EPS") of $0.70, adjusted diluted EPS1 of $0.88, an operating ratio ("OR") of 60.2 percent and an adjusted OR1 of 59.4 percent.

"The third quarter presented challenges across the supply chain, but the CP team's commitment to the foundations of precision scheduled railroading enabled us to respond quickly and effectively to changing environments," said Keith Creel, CP President and Chief Executive Officer. "We are committed to controlling what we can control, as CP continues to focus on providing service excellence to our customers and driving value for our shareholders."

Reported diluted EPS of $0.70, a 20 percent decrease from $0.88 last year, and adjusted diluted EPS of $0.88, a 7 percent increase from $0.82 last year
Reported OR, which includes Kansas City Southern ("KCS") acquisition-related costs, increased by 200 basis points to 60.2 percent from 58.2 percent
Adjusted OR, which excludes the KCS acquisition-related costs, increased 120 basis points to 59.4 percent over last year's third-quarter OR of 58.2 percent.

CP now expects low single-digit volume growth in 2021, as measured in revenue ton-miles, compared to 2020. CP remains confident that it will deliver full-year double-digit adjusted diluted EPS growth2,3 in 2021.

CP's revised guidance continues to assume other components of net periodic benefit recovery to increase by approximately $40 million versus 2020, an effective tax rate of approximately 24.6 percent and capital expenditure of $1.55 billion.

"Despite global supply chain issues and a challenging Canadian grain crop, we remain confident in our ability to deliver full-year double-digit adjusted diluted EPS growth," said Creel. "The underlying demand environment remains strong, and our commitment to generate sustainable, profitable growth will not be distracted by elements outside our control."

Additionally, CP will continue its work preparing to create the first single-line rail network linking the U.S., Mexico and Canada by combining with Kansas City Southern.

"The transitory issues over the past year have only reinforced the need for enhanced competition and optionality for North American shippers," Creel said. "Our excitement about the opportunities ahead with the combined companies continues to grow."

These measures have no standardized meanings prescribed by accounting principles generally accepted in the United States of America ("GAAP") and, therefore, may not be comparable to similar measures presented by other companies. These measures are defined and reconciled in the Non-GAAP Measures supplementary schedule of this Earnings Release.

CP's expectation for full year double-digit adjusted diluted EPS growth in 2021 is relative to 2020's adjusted diluted EPS of $3.53. CP's reported diluted EPS was $3.59 in 2020.

Although CP has provided a forward-looking non-GAAP measure (adjusted diluted EPS), management is unable to reconcile, without unreasonable efforts, the forward-looking adjusted diluted EPS to the most comparable GAAP measure (diluted EPS), due to unknown variables and uncertainty related to future results. These unknown variables may include unpredictable transactions of significant value. In recent years, CP has recognized acquisition-related costs (including legal, consulting and financing fees, and fair value gain or loss on foreign exchange (FX) forward contracts and interest rate hedges), the merger termination payment received, changes in income tax rates and a change to an uncertain tax item. These or other similar, large unforeseen transactions affect diluted EPS but may be excluded from CP's adjusted diluted EPS. Additionally, the U.S.-to-Canadian dollar FX rate is unpredictable and can have a significant impact on CP's reported results but may be excluded from CP's adjusted diluted EPS. In particular, CP excludes the FX impact of translating the Company's debt and lease liabilities from adjusted diluted EPS.

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