CALGARY, Oct. 4, 2018
/CNW/ - As part of its 2018 Investor Day, Canadian Pacific
Railway Limited (TSX: CP) (NYSE: CP) ("CP" or the "Company") today
reported preliminary third-quarter results, updated its 2018
guidance and unveiled the next phase of its long-term strategy,
focused on driving sustainable, profitable growth.
CP reports preliminary third-quarter results
- Revenues are estimated to grow by 19 percent to an all-time
record high of approximately $1.9
billion
- Operating ratio is expected to be sub-58.5 percent
- Reported diluted earnings per share (EPS) is expected to be
approximately $4.35 and adjusted
diluted EPS is expected to be approximately $4.10, the highest in the Company's history.
CP raises full-year guidance
Due to a record-setting third quarter and a strong outlook for
the remainder of the year, CP is also raising its 2018 full-year
guidance. The Company now expects adjusted diluted EPS to grow in
excess of 20 percent, increased from earlier guidance of low-double
digit growth. [1]
CP outlines strategy for sustainable, profitable growth at
2018 Investor Day
At Investor Day, hosted at CP's Ogden campus in Calgary, President and Chief Executive Officer
Keith Creel will outline for
investors the Company's multi-year strategy to deliver superior
service and financial results.
"Simply put, we have rebuilt the engine at CP and are leveraging
the strengths of our franchise to drive growth," Creel said. "Our
continued success comes from our commitment to the precision
scheduled railroading model, our deep bench of industry-leading
railroaders, a disciplined approach to capital investment, network
capacity and a focus on sustainable growth."
Financial targets for 2018-2020:
- Volume compound annual growth rate (CAGR) of mid-single digits,
measured in Revenue Ton-Miles (RTMs)
- Double-digit CAGR in adjusted diluted EPS
- Continued margin improvement through cost control and operating
leverage
- Capital expenditures of approximately $1.6 billion per year
Mr. Creel said CP's growth strategy is built on its foundations,
people and network strengths.
"Our family of nearly 13,000 CP railroaders is proud to safely
and efficiently deliver for our customers, communities and the
broader supply chain. We remain committed to the foundations of
precision scheduled railroading – across all aspects of the
Company, and with the rigor the model demands for long-term
success."
Key assumptions for 2018-2020 targets
- Exchange rate of 1.30
CAD/USD
- On-Highway Diesel price of $3.20
USD/US gallon
- Pension income consistent with 2018
- Annualized effective tax rate of approximately 25%, excluding
discrete items such as foreign-exchange gains or losses on U.S.
dollar-denominated debt and any effects of changes in tax
rates
For information regarding non-GAAP measures, including
reconciliations to the nearest GAAP measures, see Non-GAAP Measures
below.
CP will webcast presentations from today's Investor Day session
starting with opening remarks at 8:00 a.m.
mountain time. We encourage you to access the webcast and
presentation material at www.cpinvestorday.ca. Presentation
material will be available on the website at approximately
7:00 a.m. mountain time.
[1] CP's expectations for adjusted diluted EPS growth in 2018
are based on adjusted diluted EPS of $11.39 in 2017. CP expects approximately
$50 million of gains from land sales
in the fourth quarter of 2018.
Note on forward-looking information
This news release contains certain forward-looking information
within the meaning of applicable securities laws relating, but not
limited, to our operations, priorities and plans, anticipated
financial performance, including our preliminary third quarter 2018
results, 2018 full-year guidance, financial targets for 2018-2020
and related key assumptions, business prospects, planned capital
expenditures, programs and strategies. This forward-looking
information also includes, but is not limited to, statements
concerning estimates, expectations, beliefs, plans, goals,
objectives, assumptions and statements about possible future
events, conditions, and results of operations or performance.
Forward-looking information may contain statements with words or
headings such as "financial expectations", "estimates", "key
assumptions", "anticipate", "believe", "expect", "plan", "will",
"outlook", "should" or similar words suggesting future outcomes. To
the extent that CP has provided guidance using non-GAAP financial
measures, the Company may not be able to provide a reconciliation
to a GAAP measure, due to unknown variables and uncertainty related
to future results.
Undue reliance should not be placed on forward-looking
information as actual results may differ materially from the
forward-looking information. Forward-looking information is not a
guarantee of future performance. By its nature, CP's
forward-looking information involves numerous assumptions, inherent
risks and uncertainties that could cause actual results to differ
materially from the forward looking information, including but not
limited to the following factors: the above-noted key assumptions
for 2018-2020 targets, anticipated land sales in 2018, changes in
business strategies; general North American and global economic,
credit and business conditions; risks in agricultural production
such as weather conditions and insect populations; the availability
and price of energy commodities; the effects of competition and
pricing pressures; industry capacity; shifts in market demand;
changes in commodity prices; uncertainty surrounding timing and
volumes of commodities being shipped via CP; inflation; changes in
laws and regulations, including regulation of rates; changes in
taxes and tax rates; potential increases in maintenance and
operating costs; uncertainties of investigations, proceedings or
other types of claims and litigation; labour disputes; risks and
liabilities arising from derailments; transportation of dangerous
goods; timing of completion of capital and maintenance projects;
currency and interest rate fluctuations; effects of changes in
market conditions and discount rates on the financial position of
pension plans and investments; and various events that could
disrupt operations, including severe weather, droughts, floods,
avalanches and earthquakes as well as security threats and
governmental response to them, and technological changes. The
foregoing list of factors is not exhaustive. These and other
factors are detailed from time to time in reports filed by CP with
securities regulators in Canada
and the United States. Reference
should be made to "Item 1A - Risk Factors" and "Item 7 -
Management's Discussion and Analysis of Financial Condition and
Results of Operations - Forward-Looking Information" in CP's annual
and interim reports on Form 10-K and 10-Q. Readers are cautioned
not to place undue reliance on forward-looking information. Forward
looking information is based on current expectations, estimates and
projections and it is possible that predictions, forecasts,
projections, and other forms of forward-looking information will
not be achieved by CP. Except as required by law, CP undertakes no
obligation to update publicly or otherwise revise any
forward-looking information, whether as a result of new
information, future events or otherwise.
Non-GAAP Measures
The Company presents non-GAAP measures to provide a basis for
evaluating underlying earnings trends in the Company's business
that can be compared with the results of operations in prior
periods. In addition, these non-GAAP measures facilitate a
multi-period assessment of long-term profitability allowing
management and other external users of the Company's consolidated
financial information to compare profitability on a long-term
basis, including assessing future profitability, with that of the
Company's peers.
Non-GAAP measures have no standardized meaning and are not
defined by GAAP and, therefore, may not be comparable to similar
measures presented by other companies. The presentation of these
non-GAAP measures is not intended to be considered in isolation
from, as a substitute for, or as superior to, the financial
information presented in accordance with GAAP.
Adjusted Performance Measure – Adjusted Diluted Earnings Per
Share
The Company uses adjusted diluted EPS to evaluate the Company's
operating performance and for planning and forecasting future
business operations and future profitability. This non-GAAP measure
is presented in this news release. Adjusted diluted EPS provides
meaningful supplemental information regarding operating results
because it excludes certain significant items that are not
considered indicative of future financial trends either by nature
or amount. As a result, these items are excluded for management
assessment of operational performance, allocation of resources and
preparation of annual budgets. These significant items may include,
but are not limited to, restructuring and asset impairment charges,
individually significant gains and losses from sales of assets, and
certain items outside the control of management. These items may
not be non-recurring. However, excluding these significant items
from GAAP results allows for a consistent understanding of the
Company's consolidated financial performance when performing a
multi-period assessment including assessing the likelihood of
future results. Accordingly, adjusted diluted EPS may provide
insight to investors and other external users of the Company's
consolidated financial information.
The significant item that impacted preliminary reported diluted
EPS for the three months ended September 30,
2018 was a net non-cash gain of no greater than $41 million ($36
million after deferred tax(1)) or approximately
$0.25 diluted EPS due to foreign
exchange ("FX") translation of the Company's U.S dollar denominated
debt.
(1) The tax effect of the adjustment was calculated
as the pretax effect of the adjustment multiplied by the applicable
tax rate of 13.43%.
Reconciliation of GAAP Performance Measures to Non-GAAP
Performance Measures
Adjusted diluted EPS income is calculated using Net income as
reported on a GAAP basis less significant items, divided by the
weighted-average diluted shares outstanding during the period as
determined in accordance with GAAP.
The following description reconciles diluted EPS, the most
directly comparable measure presented in accordance with GAAP, to
adjusted diluted EPS, the non-GAAP measures presented in this news
release.
Reported diluted EPS, which includes an expected gain due to FX
translation of the Company's U.S. dollar-denominated debt of
approximately $0.25, is expected to
be approximately $4.35. Adjusted
diluted EPS, which excludes this gain, is expected to be
approximately $4.10.
The adjusted diluted EPS for 2017 of $11.39 is described and reconciled to reported
diluted EPS for 2017 of $16.44, the
nearest GAAP measure, under "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Reconciliation of GAAP Performance Measures to Non-GAAP Performance
Measures" in the Company's Annual Report on Form 10-K for the year
ended December 31, 2017.
Although CP has provided a forward-looking non-GAAP measure,
adjusted diluted EPS, it is not practicable to provide a
reconciliation to a forward-looking reported diluted EPS, the most
comparable GAAP measure, due to unknown variables and uncertainty
related to future results. These unknown variables may include
unpredictable transactions of significant value. In past years, CP
has recognized significant asset impairment charges, management
transition costs related to senior executives and charges or
recoveries resulting from tax rate changes. These or other similar,
large unforeseen transactions affect diluted EPS but may be
excluded from CP's adjusted diluted EPS. Additionally, the
Canadian-to-U.S. dollar exchange rate is unpredictable and can have
a significant impact on CP's reported results but may be excluded
from CP's adjusted diluted EPS. In particular, CP's 2018 adjusted
diluted EPS excludes FX impact of translating the Company's U.S.
dollar denominated long-term debt and a deferred income tax
recovery from changes in Iowa and
Missouri corporate income tax
rates.
About Canadian Pacific
Canadian Pacific is a transcontinental railway in Canada and the
United States with direct links to major ports on the west
and east coasts. CP provides North American customers a competitive
rail service with access to key markets in every corner of the
globe. CP is growing with its customers, offering a suite of
freight transportation services, logistics solutions and supply
chain expertise. Visit cpr.ca to see the rail advantages of CP.
CP-IR
View original
content:http://www.prnewswire.com/news-releases/cp-reports-preliminary-q3-results-raises-2018-guidance-and-outlines-strategy-for-driving-sustainable-profitable-growth-at-the-companys-investor-day-300724418.html
SOURCE Canadian Pacific