Canadian Pacific Railway Ltd. says it will meet its financial targets two years early and has set an ambitious set of new goals for 2018, including more than doubling its earnings per share.
“Our transformation over the last two years has been nothing short of remarkable, but the journey is far from over,” CEO Hunter Harrison said in a statement Wednesday.
“We’ve dramatically improved the operating performance of the company; our operating ratio is approaching industry best and we’ve generated significant value for shareholders. Our achievements of the past two years have set the platform for future growth.”
Mr. Harrison kicked off a two-day investor conference in New York on Wednesday afternoon with a new set of growth targets. Besides doubling its diluted earnings per share between 2014 and 2018, the railway also intends to grow annual revenue to $10-billion, up from just over $6-billion in 2013, and generate cumulative cash flow before dividends of $6-billion.
The announcement marks a key shift in Mr. Harrison’s strategy. After a couple of years of cost-cutting, including more than 4,000 layoffs, the railway is shifting its focus to revenue and profit growth.
Mr. Harrison said the company will achieve its 2016 targets this year, including an operating ratio in the mid-60s. Operating ratio is a key measure of efficiency that tracks operating costs as a percentage of revenue, and a lower number is better. When Mr. Harrison took over the corner office, the ratio was above 80%.
To achieve its goals, CP will invest in siding extensions and terminal enhancements while focusing on service and speed.
The 2018 targets assume annual capital spending of $1.4-billion to $1.6-billion, a Canadian dollar worth US$0.90 and a tax rate of 27.5%.
CP shares have more than tripled since Mr. Harrison took over as CEO in 2012 following a lengthy proxy battle initiated by activist investor Bill Ackman.
Under Mr. Harrison, the company has repeatedly exceeded expectations. In the second quarter, CP reported record profit of $371-million, record revenue of $1.68-billion and a record operating ratio of 65.1%.
The railway has received a boost from stronger shipments of commodities like grain, coal and crude oil, as well as more intermodal traffic, which involves more than one mode of transportation.
Before the investor day began, CP’s shares fell 4% to close at $222.81 on Wednesday.
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