16 November 2005
Canadian Pacific Sees EPS, Revenue Growing in 2006
Canadian Pacific Railway Ltd. said on Wednesday it expects higher revenue and earnings per share
next year as it begins to take advantage of recently added track capacity.
CP Rail, which has operations in both Canada and the northern United States, sees increased traffic volumes for most of the freight
product it ships, spurred in part by growing trade with Asia through the port of Vancouver.
"We feel pretty good in most areas," chief operating officer Fred Green told analysts in Vancouver.
One potential trouble area is automobile shipments, but CP said it believed it has relatively little exposure to the plant closures
expected to be announced by struggling U.S. car makers.
The company forecasts its earnings per share for 2006 to be in a range of $3.70 to $3.85, up from $3.15 to $3.25 in 2005, excluding
foreign exchange gains and losses on long-term debt and other specified items.
It also expects revenue to grow by 6 percent to 8 percent in 2006 over 2005, based on volume growth, higher prices and increased yield.
It expects cash flow after dividends to be more than $200 million, up from the $50 million to $100 million projected for this year.
The Calgary, Alberta-headquartered railroad said its outlook is based on oil prices averaging $58 a barrel and an average
exchange rate of $1.18 to the U.S. dollar.
SHAPING CUSTOMER BEHAVIOR
The carrier expects capital spending in 2006 of $810 million to $825 million, down from the $900 million to $920 million projected for
2005, when it undertook a $160 million expansion of its mainline capacity in Western Canada.
It plans no major new capital projects for 2006, with its focus on improving train operations to use the added western capacity and a
deal it signed with Norfolk Southern Corp in 2004 to share track between Detroit and Chicago.
CP executives expect operational savings of between $30 million and $36 million by better using locomotives and train crew and
reducing the length of time freight cars are idled.
CP began looking at expanding its western Canadian capacity in 2004, when its lines out of Vancouver were clogged by a sudden jump in
traffic and when winter weather in the Rocky Mountains brought trains to a stand-still.
Shares of CP Rail, which are up 19.5 percent so far in 2005, closed at $49.02, down 11 Canadian cents, in Toronto on Wednesday.
CP Rail's chief Canadian rival, Canadian National Railway, was scheduled to have its meeting with industry analysts late this
week.
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