Canadian Pacific Railway's profit, efficiency jump
By Allison Martell and Susan Taylor
TORONTO (Reuters) - In the final rounds of a tough proxy fight, Canadian Pacific Railway Ltd said soaring profit and efficiency gains prove that its growth plan is back on track, but some analysts questioned whether the results were enough to sway shareholders.
The results on Friday mark the last set of financials before CP's May 17 annual meeting, where shareholders will pick between the company's slate of directors and that of activist investor William Ackman's Pershing Square Capital Management.
Pershing also wants to replace CP Chief Executive Fred Green with Hunter Harrison, who is credited with pumping up profits at rival Canadian National Railway Co when he was CEO there. Pershing argues that new leadership is the only way to boost CP's lackluster operating performance.
CP shares were slightly higher after the results, which were in line with an earnings forecast released last week, rising 61 Canadian cents to C$76.64 on Friday afternoon.
Some analysts said the improved numbers will not be enough to change many shareholders' minds about whom they will back in the proxy fight. They said many investors have become impatient waiting for better results under Green, who became CEO in 2006.
"As a CEO, you basically went backwards for six years, and then you put up one good quarter, and everyone's supposed to jump on the bandwagon?" said Edward Jones analyst Brian Yarbrough.
CP's closely watched operating ratio, which measures operating costs as a percentage of revenue, improved to 80.1 percent in the first quarter from 90.6 percent in the year-earlier period. The lower the number, the more efficient the railroad's operations.
"While we did experience a generally milder winter than last year, the improvements we are delivering are a result of the fundamental changes in our operation," said CP's chief operations officer, Mike Franczak. Continued...