Canadian Pacific Railway Ltd (NYSE: CP) stock rose over 3.4% on 22nd April, 2021 (as of 10:09:26 UTC-4 · USD ; Source: Google finance) after the company posted decent results for the first quarter of FY 21. The company has delivered posted a 47% rise in first-quarter profit, helped in part by strong freight volumes in its Canadian grain segment.
The results come a day after rival Canadian National offered to buy U.S. railroad Kansas City Southern in a $33.7 billion deal, trumping Canadian Pacific’s $25 billion bid and setting the stage for a bidding war. The Canadian National proposal is expected to create the third largest Class 1 railroad and destabilize the competitive balance in the North American rail industry. Further, the proposal will reduce the number of independent routing options from four to three and would eliminate head-to-head competition for large numbers of shippers at numerous locations across KCS’s system.
CP in the first quarter of FY 21 has reported the adjusted earnings per share of $3.54, beating the analysts’ estimates for the adjusted earnings per share of $3.47, according to Zacks Investment Research. The company had reported 4 percent fall in the adjusted revenue to $1.55 billion in the first quarter of FY 21, missing the analysts’ estimates for revenue of $1.58 billion. The company has reported increase in OR by 100 basis points to 60.2 percent from 59.2 percent. The OR in the first quarter of 2021 included a $33 million expense related to Kansas City Southern acquisition costs. Adjusted OR, which excludes the acquisition-related charges, expanded by 70 basis points to 58.5 percent
For fiscal 2021, the company expects double-digit adjusted diluted EPS growth compared to 2020’s adjusted diluted EPS of $17.67, high-single digit volume growth, as measured in RTMs, capital expenditures to be of $1.55 billion, effective tax rate to be of 24.6 percent and other components of net periodic benefit recovery to increase by approximately $40 million versus 2020.
On the other hand, the company in its 2021 annual and special meeting have passed, including (i) the election of all 11 nominees listed in the management proxy circular dated March 10, 2021 as directors of CP, and (ii) the special resolution approving the five-for-one share split of CP’s issued and outstanding common share. The Share Split would result in Kansas City Southern (“KCS”) stockholders receiving the right to receive 2.445 CP shares and US$90.00 in cash for each share of KCS common stock held upon consummation of the previously announced transaction with KCS.