Canadian Pacific warns of second-quarter revenue drop, shares down 2 percent

Tue Jun 21, 2016 12:53pm EDT
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By Allison Lampert

MONTREAL (Reuters) - Canadian Pacific Railway Ltd (CP.TO: Quote) warned on Tuesday it expected second-quarter revenue to fall about 12 percent from a year earlier, hurt by weak commodity volumes, the Fort McMurray wildfire in northern Alberta and a stronger Canadian dollar.

The Calgary-based company's Canadian-listed shares were down more than 2 percent at C$157.24 by midday in Toronto, and earlier fell more than 4 percent.

The Fort McMurray wildfire sharply cut output from the Alberta oil sands, and the company was forced to temporarily halt services to the city. Grain and potash volumes have also been weak.

In a note to clients on Tuesday, Desjardins analyst Benoit Poirier said the revision was not entirely unexpected, as the rail industry grapples with weaker volumes.

U.S. railroad CSX Corp (CSX.O: Quote) also said in May it expected "high single-digit volume declines" to negatively impact second-quarter earnings.

Canadian Pacific said it expected adjusted earnings of about C$2.00 per share. It reported adjusted earnings of C$2.45 per share in the second quarter of 2015.

Analysts were expecting second-quarter earnings per share of C$2.46, according Thomson Reuters I/B/E/S.

However, CP said cost-cutting measures in the first half of the year and an expected improvement in commodity volumes would likely help the company meet its full-year guidance.   Continued...

The Canadian Pacific railyard is pictured in Port Coquitlam, British Columbia February 15, 2015. REUTERS/Ben Nelms