July 22, 2020 / 1:32 PM / in 22 days

UPDATE 2-Canadian Pacific quarterly profit beats estimates on lower costs

(Adds details on 2020 adj EPS forecast, CEO comment, shares)

July 22 (Reuters) - Canadian Pacific on Wednesday reported second-quarter profit above estimates as lower costs helped the railroad cushion a drop in freight activity due the coronavirus crisis, and prompted it to raise its 2020 earnings forecast.

Shares of Canadian Pacific were up 1% at C$368 in morning trading.

The company’s operating ratio, a measure of operating expenses as a percentage of revenue and a key metric for Wall Street, fell to 57% from 58.4% a year earlier, as fuel expenses plunged 44%. A lower operating ratio signals improved profitability.

“While economic uncertainty remains, we’re controlling what we can control - our costs,” Chief Executive Officer Keith Creel said in a statement.

Canadian Pacific now expects its full-year adjusted earnings per share to rise this year, from its prior forecast of flat earnings.

Canadian railroads were expected to benefit from a growth in crude shipments this year as oil producers looked for alternatives to congested pipelines.

But the COVID-19 pandemic has sapped demand for crude, resulting in a 28% drop in the company’s energy, chemicals and plastic shipments.

Canadian Pacific’s total carloads, the amount of freight loaded into cars during a specified period, declined 12%.

The company’s net income fell to C$635 million, or C$4.66 per share, in the quarter ended June 30, from C$724 million, or C$5.17 per share, a year earlier.

However, on an adjusted basis, Canadian Pacific earned C$4.07 per share, beating analysts’ estimates of C$3.77, according to IBES data from Refinitiv.

Its revenue declined 9.3% to C$1.79 billion, but was above expectations of C$1.77 billion. (Reporting by Ankit Ajmera in Bengaluru; Editing by Aditya Soni and Shailesh Kuber)

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