Canadian Pacific Railroad Hopes to Stare Down Ackman with Strong Performance (CP, CSX, UP)

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If any of the major US railroads needed a good quarter, it was Canadian Pacific Railway Ltd. (NYSE: CP). The company has been fighting a running battle with activist investor William Ackman for over a year now. Ackman’s Pershing Square Capital owns about 14% of CP, a stake currently worth about $1.8 billion. The dispute is expected to come to a head next month, when shareholders vote on Ackman’s proposal to replace CP’s CEO and about half the company’s board.

Based on CP’s first quarter performance, Ackman may have some tough sledding. The company posted revenue of of $1.4 billion, higher than the consensus estimate of $1.32 billion and EPS of $0.82, again higher than the consensus estimate of $0.78. That’s EPS growth of more than 300% over the same period a year ago. But the troubles facing other US carriers, like CSX Corp. (NYSE: CSX) and Union Pacific Corp. (NYSE: UNP), will also hound CP in the current quarter.

That trouble is coal shipments, which all carriers reported to be down and which are expected to go lower in the current quarter. Union Pacific said yesterday that it expects already weak coal shipments to fall by another -8% in the current quarter, down from a total of 22% of carloads to somewhere in the mid-teens.

One good quarter won’t quench Ackman’s thirst, though, and CP has a formidable challenge going forward, either as is or under Ackman’s control.

CP has seen no activity in the pre-market. Shares closed yesterday at $76.45 in a 52-week range of $44.74-$74.91.

Paul Ausick