Canadian Pacific (NYSE: CP) reached a record low operating ratio (OR) in the fourth quarter of 2020: 53.9% compared with 57% in the fourth quarter of 2019.
Investors sometimes use OR to gauge the financial health of a company, with a lower OR implying improved financial health. OR is a company’s expenses as a percentage of revenue.
“With a foundation of strong operational performance and a commitment to controlling what we can, the team continues to deliver,” said CP President and CEO Keith Creel in a release. “Despite the continued COVID-19 impacts, volumes steadily improved over the second half of 2020 and we saw revenue ton mile growth in the fourth quarter.”
Fourth-quarter net income was CA$802 million, or $5.95 per diluted share, a 20.8% increase from $664 million, or $4.82 per diluted share, in the fourth quarter of 2019. All figures are in Canadian dollars, and 1 Canadian dollar equals about 79 cents in U.S. currency.
Fourth-quarter revenues fell 3% to $2.01 billion, while operating expenses decreased 8% to $1.08 billion on a year-over-year basis.
Service metrics slipped in the fourth quarter, with train velocity down 2.2% to 21.9 mph and dwell time up 13.6% to 6.7 hours.
| Canadian Pacific | 2020 Value | 2019 Value | Y/Y Gross Change | Y/Y % Change |
| Freight revenue (millions, in CAD) | $1,968 | $2,024 | ($56) | -2.8% |
| Carloads, including intermodal (000s) | 728 | 702 | 26 | 3.7% |
| Revenue per carload (including intermodal) | $2,704 | $2,883 | -$179 | -6.2% |
| Intermodal shipments | 279 | 262 | 17 | 6.6% |
| Intermodal revenue per carload | $1,470 | $1,528 | -$58 | -3.8% |
| Gross ton miles (millions) | 71,977 | 71,495 | 482 | 0.7% |
| Freight revenue per revenue ton mile | $4.89 | $5.14 | $0 | -4.9% |
| Employee counts (average) | 12,028 | 12,860 | -832 | -6.5% |
| Train velocity (mph) | 21.9 | 22.4 | -1 | -2.2% |
| Dwell time (hours) | 6.7 | 5.9 | 1 | 13.6% |
| OR% | 53.9% | 57% | -3.1% | -5.4% |
| EPS | $5.95 | $4.82 | $1.13 | 23.4% |
Looking ahead to 2021, CP expects “high single-digit volume growth,” as measured in revenue ton miles, and it is planning capital expenditures of $1.55 billion.
“The uncertainty caused by the COVID-19 pandemic dramatically disrupted global supply chains,” Creel said. “By leveraging our unique growth opportunities and applying our precision scheduled railroading operating model, CP is continuing to lead the industry. The momentum we’ve created in the fourth quarter will continue into 2021.”
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