TRAINS: David Lassen
CALGARY, Alberta — Canadian Pacific reported record fourth-quarter and full-year financial results on Wednesday alongside record operating and safety performance.
“We had a phenomenal, exceptional 2020 set us up for an exceptional ’21, and we certainly expect to overachieve,” CEO Keith Creel told investors and analysts on the railway’s earnings call.
CP expects to see volume growth in the high single-digit percentage range this year, measured by revenue ton-miles, as the economy continues to improve and several new intermodal, automotive, energy, and grain projects and contract wins come to fruition. The railway’s 2021 outlook includes double-digit earnings growth.
“I’m bullish across the board,” Chief Marketing Officer John Brooks says, noting that volumes turned positive in the fourth quarter and he expects the momentum to continue through this year.
For the quarter, CP’s volume increased 4% based on carloads, or 2% when measured by revenue ton-miles, the favored metric of the Canadian railways. Grain, potash, fertilizers, and automotive carloads all increased by double digits compared to a year ago. For the year, CP’s traffic fell 2%, the smallest traffic decline of the Class I systems.
CP’s fourth-quarter operating income rose 4%, to $928 million, although revenue declined 3%, to $2 billion. Earnings per share, adjusted for the impact of one-time items, increased 6%, to $5.06. The operating ratio was a record 53.9% as expenses declined 8%, helped by lower fuel prices.
For the full year, operating income grew 6%, to $3.3 billion, as revenue fell 1%, to $7.7 billion. Earnings per share, adjusted for one-time items, grew 7%. CP’s operating ratio improved 2.8 points to a record 57.1%, which led the industry. Executives expect the operating ratio to improve by at least another point this year.
CP set full-year records for key operating metrics, including train length and weight, locomotive productivity, and fuel efficiency. The railway also recorded the safest year in its history based on Federal Railroad Administration personal injury and train accident rates, which declined 22% and 9% respectively.
Creel credits CP’s financial and operating results to the railway’s employees, who showed resilience during the pandemic. To recognize that, CP awarded its union employees a year-end bonus to thank them for sacrifices they made to keep traffic and the economy moving in 2020. Union members received a one-time bonus of $1,500; officials said the tab for the bonus program came to $17 million.
CP will maintain a capital budget of $1.5 billion this year. Despite traffic growth, Creel says CP has capacity in terminals as well as on its main lines. The railway will add several passing sidings this year, however, continuing a multiyear program.
— Updated at 11:45 a.m. on Jan. 28 with additional information on year-end bonus for employees.
