Canada, US Railways Report: 1Q 2016

Canadian Pacific Railway, out of Calgary, AB, Wednesday reported 1Q 2016 earnings of $540 million, or $3.51 per diluted share, up from a pro t of $320 million, or $1.92 per diluted share a year ago.

Railways Quarterly Results

Canadian Pacific also reported that its operating ratio, which tracks operating expenses as a percentage of revenue, improved to 58.9 compared with 63.2 per cent a year ago.

In addition to the increased dividend, the railway said it may buy back up to 6.91 million of its shares or roughly five per cent of its “public oat” of shares under its normal course issuer bid.

CP bought back 11,375,189 of its shares at a weighted average price of $198.46 under its previous normal course issuer bid, which expired March 17.

Norfolk Southern, out of Norfolk, VI, Thursday reported a surprise 25 per cent profit jump in 1Q, less than two weeks after Canadian Pacific Railway abandoned its nearly US$30 billion pursuit of the rail transportation company.

The 1Q operating ratio was 70.1 per cent. The company is aiming for annual productivity savings of more than US$650 million and an operating ratio below 65 per cent by 2020.

The cost savings are particularly important as Norfolk Southern’s main revenue streams have diminished.

Coal, as it has in recent quarters, remained a drag on the railroad sector’s results.

For the quarter, the company posted a pro t of US$387 million, or US$1.29 a share, up from US$310 million, or US$1 a share, a year earlier. Revenue fell 5.7 per cent to US$2.42 billion.

Omaha, NE’s, Union Pacific also Thursday reported a 15 per cent drop in quarterly pro t due to weak freight demand, especially for coal, and forecast total volumes to be down this year.

The company’s performance was hurt by big declines in energy-related businesses, particularly coal, and oil and natural gas shale fracking sand, which shrunk 34 per cent and 49 per cent, respectively in the quarter.

Union Pacific said it expects total volumes for the year to decline in the mid single digits.

As major transportation providers for cargoes representing all facets of the US economy, railroads have traditionally been seen as an economic bellwether.

Overall, revenue in the quarter decreased 14 per cent to US$4.83 billion and pro t fell to US$979 million from US$1.15 billion.

For the three months ended March 31, Union Pacific’s total freight volume skidded 14 per cent as declines across sectors more than offset growth in automotive, which rose 7 per cent.