Canadian Pacific Q4 Profit Drops 38%

Canadian Pacific (TSE: CP) revenues increased slightly in the fourth quarter of 2021, but profits fell as costs rose due to supply chain issues and the planned takeover of Kansas City Southern.

Revenue & Earnings

Revenue came in at C$2.04 billion in the fourth quarter of 2021, an increase of 1% from C$2.01 billion last year.

Meanwhile, diluted EPS was C$0.74 in Q4 2021, a decrease of 37.8% from C$1.14 in Q4 2020.

On an adjusted basis, CP earned C$0.95 per share for the quarter, down 5.9% from C$1.01 last year.

The reported operating ratio (including Kansas City Southern acquisition-related costs) improved by 530 basis points to 59.2% in the fourth quarter, from 53.9% last year. The adjusted operating ratio, which excludes costs related to the KCS acquisition, increased 360 basis points to 57.5%.

CEO Commentary

Canadian Pacific’s President and CEO Keith Creel said, “I am tremendously proud of the resilience the CP team demonstrated to deliver these results. CP’s world-class railroaders relied on our strong operating model and commitment to controlling what we can control to safely deliver for customers and shareholders despite the unique challenges faced in the quarter. This quarter we also reached a crucial milestone in our journey to create the first single-line rail network linking the U.S., Mexico, and Canada by combining with Kansas City Southern, which closed into voting trust [on] December 14.”

Creel added that the challenging environment and global economic strength, combined with CP’s unique initiatives and service excellence, position the railway to generate profitable growth for its customers, employees, and shareholders.

Wall Street’s Take

On January 19, Scotiabank analyst Konark Gupta kept a Buy rating on CP and lowered its price target to C$105 (from C$106). This implies 13.4% upside potential.

Overall, the consensus on the Street is that CP is a Strong Buy based on 10 Buys and three Holds. The average Canadian Pacific price target of C$108.74 implies upside potential of about 18.2% from current levels.

TipRanks’ Smart Score

Canadian Pacific scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock returns are likely to beat the overall market.

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