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Canadian Pacific raises guidance after profits climb in the quarter

Last Updated Oct 17, 2017 at 6:20 pm EST

CALGARY – Canadian Pacific Railway Ltd. (TSX:CP) has revised upwards its 2017 guidance after seeing profits climb for another quarter.

The Calgary-based company said Tuesday that net income for the third quarter came in at $510 million, or $3.50 per share, an increase of almost 50 per cent from the $347 million or $2.34 per share it pulled in a year ago.

Revenue for the quarter ended Sept. 30 grew three per cent to $1.6 billion, while operating income was up five per cent to $690 million.

The positive results prompted the company to revise its guidance and it now expects to see double-digit growth for the year, up from its earlier guidance of high single-digit growth.

Company CEO Keith Creel said on an earnings call that the company’s performance was a result of the drive for further efficiencies in precision railroading, which he’ll continue doing.

“I’m focused on the end product, which is earnings growth — quality, sustainable earnings growth,” said Creel.

“Rest assured, I’ve got a book of opportunities in my bottom desk drawer and it just takes time to get to them.”

Canadian Pacific says its operating ratio — a measure of efficiency that balances revenue with expenses — also improved, down by 100 basis points to 56.7 per cent compared with the third quarter of 2016.

Edward Jones analyst Dan Sherman said the third-quarter results were solid, with adjusted third-quarter earnings of $2.90 coming in above the consensus expectation of $2.87.

He said he maintains a buy rating on the company.

“We believe that Canadian Pacific’s increased emphasis on marketing and continuing network improvements should accelerate the creation of value for shareholders.”