Upcoming AWS Coverage on Kansas City Southern Post-Earnings Results

LONDON, UK / ACCESSWIRE / January 20, 2017 / Active Wall St. announces its post-earnings coverage on Canadian Pacific Railway Ltd. (NYSE: CP). The Company reported its fourth quarter and fiscal 2016 results on January 18, 2017. The railroad posted its lowest-ever Q4 operating ratio which came in at 56.2% and a record-low full-year operating ratio of 58.6%. Register with us now for your free membership at: http://www.activewallst.com/register/.

One of Canadian Pacific Railway's competitors within the Railroads space, Kansas City Southern (NYSE: KSU), announced on January 06, 2017, that it will release its financial results for Q4 2016 on Friday, January 20, 2017, before the opening of trading on the NYSE. AWS will be initiating a research report on Kansas City Southern in the coming days following its earnings release.

Today, AWS is promoting its earnings coverage on CP; touching on KSU. Get our free coverage by signing up to:

http://www.activewallst.com/registration-3/?symbol=CP

http://www.activewallst.com/registration-3/?symbol=KSU

Earnings Reviewed

For the three months ended on December 31, 2016, Canadian Pacific reported that revenues decreased 3% to C$1.64 billion from C$1.69 billion in the year ago period.

For Q4 2016, Canadian Pacific posted net income of C$384 million compared to net income of C$319 million in Q4 2015. The Company's diluted earnings per share (EPS) increased 25% to C$2.61 in Q4 2016, from C$2.08 in Q4 2015 and adjusted diluted EPS rose 12% to C$3.04 in the reported quarter from C$2.72 in the year ago same period.

For FY16, Canadian Pacific's revenues decreased 7% to C$6.23 billion from C$6.71 billion. The Company's FY16 operating ratio declined 140 basis points on a y-o-y basis to a record 58.6%. Canadian Pacific's FY16 reported diluted EPS increased 27% to C$10.63 from C$8.40, while adjusted diluted EPS rose 2% to C$10.29 from C$10.10.

Lower Expenses

For Q4 2016, Canadian Pacific's Comp and benefits were down 15%, or C$51 million, to C$282 million compared to Q4 2015 as a result of the 9% smaller workforce and positive pension income. The Company finished the year with a workforce of about 11,700.

During Q4 2016, Canadian Pacific's Fuel expense was up 4% y-o-y as a result of higher fuel cost and an C$8 million one-time cost for the settlement of a reciprocal fueling contract paid to another railroad. Purchase services declined 21% due to C$215 million largely due to a C$45 million in landfills during the reported quarter.

The Company stated that lower crude hauling costs and lower contracted services also aided in the y-o-y expense decline. The adjusted effective tax rate was 25.3% for Q4 2016 and 26.2% for FY16, a reflection of some favorable year-end tax adjustments as a result of change in traffic mix as well as other tax planning initiatives.

CEO Retires

In a separate press release on the same day, Canadian Pacific announced that Keith Creel will become President and Chief Executive Officer of the Company effective January 31, 2017 following E. Hunter Harrison's decision to retire from Canadian Pacific. The Company stated that Mr. Harrison will take vacation leave effective immediately until January 31, 2017, and Mr. Creel will assume the CEO's responsibilities during this period.

In the press release, Canadian Pacific stated that Mr. Harrison had approached the Board to discuss his retirement from the Company and potential related modifications to his employment arrangements that would allow him to pursue opportunities involving other Class 1 Railroads. A special committee of the Board oversaw discussions with Mr. Harrison. Following negotiations, receipt of independent legal advice, and careful deliberation, the special committee recommended to the Board that Canadian Pacific enter into a separation agreement with Mr. Harrison.

Under terms of the separation agreement, CP has agreed to a limited waiver of Mr. Harrison's non-competition obligations. In consideration of the waiver, Mr. Harrison has agreed to terminate all roles he has with CP and forfeit substantially all benefits and perquisites he is entitled to receive from CP going forward, including his pension. In addition, Mr. Harrison has agreed to surrender for cancellation all of his vested and unvested equity awards, except for a portion of his vested options he was granted upon arrival at CP in June 2012. The total value of benefits and awards forfeited by Mr. Harrison is approximately CC$118 million.

Cash Flow & Balance Sheet

In FY16, Canadian Pacific generated free cash of C$1 billion. In May 2016, the Company increased its dividend 43%, completed a 5% share buyback program in September 2016 and deployed roughly C$1.18 billion on Capex in FY 2016. During FY 2017, the company plans to spend approximately C$1.25 billion on Capex, a 6% increase over 2016. The company stated that roughly 70% of its Capex will be spent on basic replacement with the balance going towards initiatives focused on improving productivity and service reliability.

Outlook

For FY17, Canadian Pacific is expecting to see positive volume growth. The company is anticipating pension income of C$180 million in FY17 for its defined benefit and defined contribution plans, which has an incremental benefit of C$100 million from the income in 2016. The Company expect landfills of approximately C$60 million total for 2017.

Canadian Pacific stated that with over 400 locomotives in storage, it does not anticipate the need to acquire new units for the next several years. However, the Company did state that it has some funds earmarked in 2017 to modernize and improve reliability of its existing fleet.

Stock Performance

On January 19th, 2017, Canadian Pacific Railway's share price finished the trading session at $150.31, rising 3.51%. A total volume of 4.21 million shares exchanged hands, which was higher than the 3 months' average volume of 802.95 thousand shares. The stock has advanced 0.32% and 45.78% in the last six months and past twelve months, respectively. Furthermore, since the start of the year, shares of the Company have gained 5.28%. The stock is trading at a PE ratio of 19.61 and has a dividend yield of 1.01%.

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