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Canadian Pacific's Underperforming Q3 Report Followed By A Constructive Conference Call

Susquehanna’s Bascome Majors maintained a Neutral rating on the company, while raising the price target from $167 to $168.

Constructive Call

“CP underperformed today, but the content of their call was constructive, with management showing conviction in 2017 margin expansion despite an uncertain top-line outlook,” Majors mentioned.

The company reports its adjusted EPS for Q3 at C$2.73, missing the consensus and the estimate. Canadian Pacific also missed the estimates on operating income, while interest expense was above the estimate.

The company also benefited from a lower than expected tax rate.

Total revenues declined 9 percent year-on-year, with carloads declining 3 percent and yields down 7 percent.

Guidance Cut

The analyst noted that the guidance cut did not come as a surprise since analysts and investors had been calling for a significant cut to the full year 2016 guidance to 10 percent EPS growth for over two quarters now.

“So today’s guide down to mid-single-digit EPS growth for 2016 was absolutely a consensus expectation in direction, though our sense is the buy side was a point or two ahead of the sell side, leading to today’s modest selloff in shares,” Majors stated.

Oct 2016Raymond JamesDowngradesStrong BuyOutperform
Sep 2016CitigroupMaintainsBuy
Sep 2016BarclaysMaintainsOverweight

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