CP Rail rakes in record 2nd-quarter revenue as traffic increases

Canadian Pacific Railway Ltd. announced record second-quarter revenues of nearly $2 billion Tuesday, driven by grain, international container traffic and energy, chemicals and plastics to beat analysts' expectations.

Traffic increased in all categories, with grain hitting its third-highest level in CP Rail's 138-year history at $422 million, a 13 per cent boost.

Container traffic and energy, chemicals and plastics the railway's second- and third-biggest earners rose by 12 per cent and 25 per cent, respectively, reaching $404 million and $346 million.

The collapse in discounts on western Canadian crude oil prices since the Alberta government imposed a cap on oil production in January has slowed crude-by-rail shipments to U.S. customers, said CP Rail's head of marketing, John Brooks.

Although crude by rail remains variable, we expect volumes will continue to increase as production and curtailment balance stabilizes- John Brooks, head of marketing for CP Rail

"Although crude by rail remains variable, we expect volumes will continue to increase as production and curtailment balance stabilizes," he said on a conference call with investors.

Chief executive Keith Creel stressed revenue growth "across every line of business" as well as an improved operating ratio of 58.4 per cent, a second-quarter record on a key metric.

Although international container traffic was solid, Creel noted that domestic container movement and domestic coal were among the railway's "challenged areas where there's some weakness."

Analyst Walter Spracklin of RBC Dominion Securities said that "we view this as a very solid quarter for CP."

Net income jumped more than two-thirds to $724 million or $5.17 per diluted share in the quarter ended June 30, compared with $436 million or $3.04 per diluted share in the same quarter last year, the Calgary-based company said.

Revenue of $1.98 billion was up from $1.75 billion a year ago.

Adjusted earnings per diluted share hit $4.30, rising 36 per cent from $3.16 in 2018, CP Rail said.

Analysts on average had expected a profit of $4.18 per share, according to Thomson Reuters Eikon.

The Calgary-based company's shares gained $7.59 or 2.45 at $317.25 in morning trading on the Toronto Stock Exchange. They reached $318 earlier in the session, just 75 cents off the all-time high.