CP’s earnings driven down by labor negotiations

“With truck capacity continuing to tighten,” strong performance expected for remainder of the year.    Canadian Pacific, the smaller of the two Canada-based Class I railways, saw net income for the second quarter of 2018 tumble 9.2 percent year-over-year to C$436 million (U.S. $329 million).
   CP President and CEO Keith Creel said the railway faced headwinds during the quarter from service interruptions due to labor negotiations and strike notices. However, CP was able to reach tentative, long-term agreements with both the Teamsters Canada Rail Conference and the International Brotherhood of Electrical Workers.
   Revenues for the quarter ticked up 6.5 percent year-over-year to C$1.75 billion amid a boost in volumes, which increased 4 percent as measured by revenue-ton miles, while carloads inched up 2 percent.
   CP’s intermodal segment, which brought in 20.6 percent of the company’s total revenues for the quarter at C$360 million, appears poised for growth. Creel said during the earnings call, “With truck capacity continuing to tighten in the anticipation of a strong fall peak, we expect both our international and domestic intermodal to perform quite well for the remainder of the year.”
   Over the next four years, CP will invest C$0.5 billion in hoppers, enabling it to move more grain more efficiently across its network, Creel said. CP’s grain segment generated C$372 million in revenues for the quarter, representing 21.3 percent of the company’s total revenues for the quarter.
   For the full year, CP expects to spend about C$1.55 billion in capital, CP Executive Vice President and Chief Financial Officer Nadeem Velani said on the earnings call. “We are in a very fortunate position to have a significant pipeline of high-return projects to invest in,” Velani said. “Our first half of the year had its challenges, with some difficulty in Q1 with weather, and some challenges from stopping and starting from labor disruptions, but we are very excited to deliver a very strong second half.”