Canadian Pacific Kansas City Ltd. has lowered its financial forecast for the year, citing the cost of weaker consumer demand and the B.C. port workers strike.
“No doubt a challenging quarter as we dealt with a softer demand environment,” CEO Keith Creel told analysts on a conference call Wednesday.
“Certainly not the outcome we had planned, but it’s the prudent thing to do at this point.”
Creel cited “economic headwinds” and the 13-day job action in July that shut down the country’s largest port, which prompted the railway to predict flat to slightly positive adjusted diluted earnings this year versus last.
The revision marks a more pessimistic outlook than the one offered three months earlier, when the Calgary-based company projected adjusted diluted earnings would grow by mid-single digits in 2023.
It comes as consumers continue to reroute their spending toward services over products in a reversal of pandemic trends, with pressure from inflation and rising interest rates as an additional drag.
Meanwhile, the two-week strike — plus a brief wildcat job action — halted operations at most ports along the West Coast. In the first week alone, it depressed the number of containers hauled by Canadian railways to barely half the level reached during the same period in 2022, according to the American Railroad Association.
Creel also highlighted hurdles relating to Canadian Pacific’s merger with Kanas City Southern in April. The US$31-billion deal — the continent’s first big rail merger in more than two decades — created the only railway stretching from Canada through to the U.S. and Mexico.
“We certainly have not been perfect,” Creel said, noting integration of all 20,000 employees has proven tougher than expected.
In the quarter ended Sept. 30, CPKC reported that net income fell 12 per cent to $780 million from the combined $891 million earned by Canadian Pacific and Kansas City Southern a year earlier.
Despite the drop in profits, CPKC said revenues surged 44 per cent to $3.34 billion in its third quarter from a combined $2.31 billion in the same period the year before.
Diluted earnings fell to 84 cents per share from 96 cents per share, below analyst expectations of more than 90 cents per share, according to financial data firm Refintiv.