Canadian Pacific Railway Ltd.’s share price rose in early trading on Thursday, extending after-hours gains as investors reacted to the carrier’s better-than-expected fourth-quarter earnings.
Calgary-based CP said after markets closed Wednesday that adjusted earnings per share rose by 41 per cent, compared with the same period in 2017, and revenue rose by 17 per cent to $2-billion. CP posted higher revenue across a range of goods and improved its operating ratio to 56.5 per cent, a measure of costs versus sales.
“By every financial measure, literally every financial measure, this has been a record year, both on the quarter basis as well as a yearly basis,” Keith Creel, CP’s chief executive officer, said on a conference call on Wednesday.
Analysts called the quarterly results strong and welcomed CP’s 2019 guidance for double-digit profit growth and revenue-per-ton-mile of about 5 per cent.
Christian Wetherbee, a Citigroup analyst in New York, calculates CP’s 2019 earnings per share will reach $17, compared to 2018’s adjusted figure of $14.51 and more than the consensus of $16.38. “This was the type of upside CP shares needed to perform well and we got it,” Mr. Wetherbee said.
Desjardins stock analyst Benoit Poirier said in a note to clients that CP’s outlook is conservative and that recent weakness in the share price makes it an “attractive buying opportunity for long-term investors.”
Mr. Poirier raised his 12-month price target for the shares to $314 from $311.
Adding to the optimism, CP said on Thursday morning it has renewed its contract with Hapag-Lloyd AG, an ocean container-ship owner that calls in Vancouver and Montreal. Mr. Creel told analysts on Wednesday CP recently extended shipping agreements with retailers Loblaw and Canadian Tire and signed with Dollarama.
Walter Spracklin, a Royal Bank of Canada stock analyst, said in a research note that freight volumes look solid for 2019 and the railway is able to keep freight fees rising, all of which makes CP shares “a compelling investment opportunity.”