CPKC forecasts solid earnings in 2024 after a big drop in quarterly profits. The Canadian Pacific Kansas City (CPKC) logo is seen in this handout. THE CANADIAN PRESS/HO
Canadian Pacific Kansas City Ltd. expects its adjusted earnings per share to grow by double digits this year, following a bump in revenue last quarter – and despite lower container volumes and a weaker grain harvest.
“Looking forward to 2024, we are confident that our unique synergy opportunities along with improving macroeconomic conditions can overcome a weak Canadian grain crop and position us for another strong performance this year,” said CEO Keith Creel.
Smaller loads of wheat and other grains are expected to persist into the second half of 2024, the company said.
Containers remain another source of uncertainty, as consumers continue to reroute their spending toward services rather than goods in a reversal of pandemic trends. Pressure from inflation and rising interest rates threaten to work as additional drags on product purchases.
CPKC said it saw lower domestic container volumes last quarter due to shrinking retail volumes, even as international container shipments rebounded along with a ramp-up in activity at the Port of Vancouver after the 13-day strike in July.
The decrease was partially offset by a rise in refined fuel products and automotive shipments, as COVID-19-induced kinks in the manufacturing supply chain smoothed themselves out.
CPKC – the product of Canadian Pacific’s purchase of Kansas City Southern in April – said it boosted revenues four per cent to $3.78 billion last quarter from a combined revenue of $3.64 billion a year earlier. Core adjusted combined income climbed three per cent to $1.10 billion last quarter from $1.07 billion a year earlier.
The US$31-billion deal – the continent’s first big rail merger in more than two decades – created the only railway stretching from Canada through to the U.S. and Mexico.
“This isn’t easy,” chief operating officer Mark Redd told analysts on a conference call, referring to the blending of two distinct rail networks. But he also stressed the potential efficiency made possible by “synergies.”
Fourth-quarter core adjusted combined diluted earnings rose to $1.18 per share from $1.14 per share the previous year, CPKC said.
Net income fell 20 per cent year over year to $1.02 billion last quarter from $1.27 billion, it said. The figure doesn’t take into account Kansas City Southern profits from last year.
CPKC forecast that core adjusted combined diluted earnings per share will grow in the double digits this year from $3.84 per share in 2023.
The railroad operator plans to spend $2.75 billion on infrastructure upgrades and purchases throughout 2024.
This report by The Canadian Press was first published Jan. 30, 2024.
Companies in this story: (TSX:CP)
