Canadian Pacific Railway CEO adamant railway consolidation will still happen

The collapse of Canadian Pacific Railway Ltd.‘s (TSE:CP, Mkt cap 27.96B, P/E 18.48, Div/yield 0.50/1.08, EPS 9.98, Shares 153.00M) bid for Norfolk Southern Corp. has done little to deter the company’s CEO from the stance that railway consolidation must and will happen, the Financial Post reports.

Chief executive Hunter Harrison was speaking following the announcement of a better-than-expected first-quarter profit, attributed to cost controls and operating efficiencies.

Canada’s second-largest railway operator, which recently abandoned its US$27-billion pursuit of U.S.-based Norfolk Southern Corp., increased its quarterly dividend by 43% and said it plans to buy back as many as 6.9 million shares, or about 4.5% of its total outstanding.

Despite a weak freight market, CP reported a record first-quarter operating ratio — a key indicator of efficiency for railroads, where firms try to achieve as a low a number as possible — of 58.9%, down 430 basis points.

Adjusted earnings rose to $2.50 per share, beating the average analyst estimate of $2.42, while revenue fell 4% to $1.59 billion.

Harrison declared himself “extremely pleased” with the results from the quarter, before addressing CP’s failed bid for Norfolk Southern Corp.

“A lot of people were against the transaction, some of the customers that I visited with, and what they were against was not mergers, they were against how mergers were executed in the past,” Harrison said.

“I used to hate to get a spanking for something my sister did, but there’s only so much we can do.”

However, he remains adamant that consolidation will happen in the industry – but it won’t be before he retires next year.

“We just have to develop a little patience, which I’m not really endowed with, but it’ll happen one day soon,” he said.

Canadian Pacific Railway Limited, head-quartered in Calgary AB, operates railways in Canada and the United States and provides logistics and supply chain expertise. CP provides rail and intermodal transportation services over a network of approximately 13,700 miles, serving the principal business centers of Canada from Montreal, Quebec, to Vancouver, British Columbia (B.C.), and the United States Northeast and Midwest regions. The Company transports bulk commodities, merchandise freight and intermodal traffic. More from Reuters »

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