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Canadian Pacific Kansas City (CP) Barely Moves Post Q1 Earnings

Zacks Equity Research
·4 min read

Canadian Pacific Kansas City Limited’s CP stock has hardly moved since the first-quarter 2023 earnings announcement on Apr 26. The muted response could be attributed to the company’s lower-than-expected numbers on both fronts.

Delving Deeper

Canadian Pacific Kansas City’s first-quarter 2023 earnings (excluding 1 cent from non-recurring items) of 63 cents (C$0.86) per share fell short of the Zacks Consensus Estimate of 70 cents. However, the bottom line increased 26% year over year. Quarterly revenues of $1,675.9 million (C$2,266 million) missed the Zacks Consensus Estimate of $1,780.4 million and declined 6% year over year.

Freight revenues, contributing 97.8% to the top line, rose 23% on a year-over-year basis. CP’s freight segment consists of Grain (up 37%), Coal (up 11%), Potash (up 22%), Forest products (up 13%), Energy, chemicals and plastics (down 10%), Metals, minerals and consumer products (up 13%), Automotive (up 32%), Fertilizers and Sulphur (up 19%) and Intermodal (up 8%).

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In the reported quarter, total freight revenues per revenue ton-miles rose 7% year over year. Total freight revenues per carload increased 10% from the year-ago quarter’s reported figure. All percentages are foreign exchange adjusted.

On a reported basis, operating income was up 55%, while total operating expenses increased 10.2% year over year in the quarter under review. Operating ratio (operating expenses as a percentage of revenues on an adjusted basis) improved to 63.4% in the March quarter from 70.5% in the year-ago quarter.  Lower the value of the metric, the better.

Management expects tax rate for full-year 2023 to be 23.5%. With the closure of the merger with Kansas City Southern last month, further updates will be provided at CP’s investor day on Jun 27 and 28 in Kansas City, MO.

Canadian Pacific Kansas City, currently carrying a Zacks Rank #3 (Hold), exited the March quarter with cash and cash equivalents of C$290 million compared with C$451 million at the end of 2022. Long-term debt amounted to C$18,066 million compared with C$18,141 million at the end of 2022.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Q1 Performances of Some Other Transportation Companies

J.B. Hunt Transport Services’ JBHT first-quarter 2023 earnings of $1.89 per share missed the Zacks Consensus Estimate of $2.04 and declined 17.5% year over year.

JBHT’s total operating revenues of $3,229.58 million also lagged the Zacks Consensus Estimate of $3,434.4 million and fell 7.4% year over year. The downfall was due to declines in the volume of 25% in Integrated Capacity Solutions (ICS), 5% in Intermodal (JBI) and 17% in Final Mile Services (FMS), respectively. A decline of 17% in revenue per load in Truckload (JBT) also added to the woes.

Revenue declines in ICS, JBI, FMS and JBT were partially offset by Dedicated Contract Services revenue growth of 13%. JBHT’s total operating revenues, excluding fuel surcharges, decreased 10.2% year over year.

Delta Air Lines’ DAL first-quarter 2023 earnings (excluding 82 cents from non-recurring items) of 25 cents per share missed the Zacks Consensus Estimate of 29 cents. Volatile fuel prices and unfavorable weather conditions led to this downtick. DAL reported a loss of $1.23 per share a year ago as air-travel demand was not so buoyant back then.

DAL reported revenues of $12,759 million, which missed the Zacks Consensus Estimate of $12,767.4 million. Driven by higher air-travel demand, total revenues increased 36.49% on a year-over-year basis.

Alaska Air Group ALK reported first-quarter 2023 loss of 62 cents per share, wider than the Zacks Consensus Estimate of a loss of 48 cents. In the year-ago quarter, ALK incurred a loss of $1.33.

ALK’s operating revenues of $2,196 million missed the Zacks Consensus Estimate of $2,202.5 million. The top line jumped 31% year over year, with passenger revenues accounting for 90.3% of the top line and increasing 31% owing to continued recovery in air-travel demand.

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Alaska Air Group, Inc. (ALK) : Free Stock Analysis Report

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Zacks Investment Research