Canadian Pacific Railway Ltd reports 22.3% CAPEX decline and 7.2% Revenue decline
18.01.2017 • About Canadian Pacific Railway Ltd (
$CP) • By InTwits
Canadian Pacific Railway Ltd reported 2016 financial results today. Overall the company's long term financial model is characterised by the following facts:
- EBITDA Margin is expanding: 51.6% in 2016 vs. 48.9% in 2015 vs. 26.1% in 2012
- Canadian Pacific Railway Ltd has high CAPEX intensity: 5 year average CAPEX/Revenue was 20.8%. At the same time it's a lot of higher than industry average of 7.1%.
- CAPEX is quite volatile: 140 in FY2016, 130 in FY2015, 50 in FY2014, 146 in FY2013, 176 in FY2012
- The company has highly profitable business model: ROIC is at 15.0%
- It operates with high leverage: Net Debt/EBITDA is 2.6x while industry average is 2.2x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.
Canadian Pacific Railway Ltd ($CP) key annual financial indicators
| mln. CAD | 2012 | 2013 | 2014 | 2015 | 2016 | 2016/2015 |
|---|
P&L
|
|---|
| Revenue | 5,695 | 6,133 | 6,620 | 6,712 | 6,232 | -7.2% |
| EBITDA | 1,488 | 1,985 | 2,891 | 3,283 | 3,218 | -2.0% |
| Net Income | 484 | 875 | 1,476 | 1,352 | 1,599 | 18.3% |
Balance Sheet
|
|---|
| Cash | 333 | 476 | 226 | 650 | 164 | -74.8% |
| Short Term Debt | 62 | 328 | 134 | 30 | 25 | -16.7% |
| Long Term Debt | 4,636 | 4,687 | 5,625 | 8,927 | 8,659 | -3.0% |
Cash flow
|
|---|
| Capex | 1,148 | 1,236 | 1,449 | 1,522 | 1,182 | -22.3% |
Ratios
|
|---|
| Revenue growth | 10.0% | 7.7% | 7.9% | 1.4% | -7.2% | |
| EBITDA growth | 2.1% | 33.4% | 45.6% | 13.6% | -2.0% | |
| EBITDA Margin | 26.1% | 32.4% | 43.7% | 48.9% | 51.6% | 2.7% |
| Net Income Margin | 8.5% | 14.3% | 22.3% | 20.1% | 25.7% | 5.5% |
| CAPEX, % of revenue | 20.2% | 20.2% | 21.9% | 22.7% | 19.0% | -3.7% |
| ROIC | 8.2% | 10.5% | 16.0% | 17.0% | 15.0% | -2.0% |
| ROE | 9.9% | 14.4% | 23.2% | 26.0% | 33.9% | 8.0% |
| Net Debt/EBITDA | 2.9x | 2.3x | 1.9x | 2.5x | 2.6x | 0.1x |
Canadian Pacific Railway Ltd ($CP) key quoterly financial indicators
| mln. CAD | 16Q1 | 16Q2 | 16Q3 | 16Q4 | YoY change |
|---|
P&L
|
|---|
| Revenue | 1,591 | 1,450 | 1,554 | 1,637 | -4.4% | -12.2% | -9.1% | -3.0% |
| EBITDA | 815 | 712 | 812 | 879 | 7.5% | -10.0% | -10.0% | 5.6% |
| Net Income | 540 | 328 | 347 | 384 | 68.8% | -15.9% | 7.4% | 20.4% |
Balance Sheet
|
|---|
| Cash | 571 | 92 | 103 | 164 | 210.3% | -50.3% | -84.4% | -74.8% |
| Short Term Debt | 23 | 198 | 391 | 25 | -74.7% | 120.0% | 1,248.3% | -16.7% |
| Long Term Debt | 8,430 | 8,383 | 8,488 | 8,659 | 32.6% | 26.8% | -1.9% | -3.0% |
Ratios
|
|---|
| EBITDA Margin | 51.2% | 49.1% | 52.3% | 53.7% | 5.7% | 1.2% | -0.5% | 4.4% |
| Net Income Margin | 33.9% | 22.6% | 22.3% | 23.5% | 14.7% | -1.0% | 3.4% | 4.5% |
Revenue and profitability
The company's Revenue decreased on 7.2%. Annual revenue decline showed slowdown in 16Q4 - revenue decreased on 3.0%. Despite revenue decline the EBITDA margin expanded. EBITDA Margin increased on 2.7 pp from 48.9% to 51.6% in 2016.
Net Income marign increased on 5.5 pp from 20.1% to 25.7% in 2016.
Capital expenditures (CAPEX) and working capital investments
In 2016 the company had CAPEX/Revenue of 19.0%. CAPEX/Revenue decreased slightly on 1.2 pp from 20.2% in 2013 to 19.0% in 2016. For the last three years the average CAPEX/Revenue was 21.2%.
Return on investment
The company operates at high and attractive ROE (33.94%) while ROIC is a bit lower (14.97%). ROIC decreased on 2.0 pp from 17.0% to 15.0% in 2016. ROE increased on 8.0 pp from 26.0% to 33.9% in 2016.
Leverage (Debt)
Company's Net Debt / EBITDA is 2.6x and Debt / EBITDA is 2.7x. Net Debt / EBITDA jumped on 0.1x from 2.5x to 2.6x in 2016. Debt decreased on 3.0% while cash dropped on 74.8%.
Appendix 1: Peers in Industrial
Below you can find Canadian Pacific Railway Ltd benchmarking vs. other companies in Industrial industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Progressive Waste Solutions Ltd ($BIN) | | 16.1% | 7.8% | 1.8% | 59.4% |
| Baylin Technologies Inc ($BYL) | | 16.5% | -44.0% | -4.1% | 47.5% |
| CCL Industries Inc ($CCL.B) | | 44.4% | 36.8% | 17.5% | 30.8% |
| Stantec Inc ($STN) | | 17.9% | 13.3% | 14.4% | 30.5% |
| Avigilon Corp ($AVO) | | 72.6% | 41.9% | 17.7% | 22.2% |
| |
|---|
| Median (51 companies) | | 4.9% | 10.4% | 8.5% | 3.2% |
|---|
| Canadian Pacific Railway Ltd ($CP) | | 7.7% | 7.9% | 1.4% | -7.2% |
Top companies by Gross margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Pure Technologies Ltd ($PUR) | 77.9% | 78.0% | 77.5% | 75.6% | |
| WSP Global Inc ($WSP) | 81.1% | 83.2% | 81.0% | 74.0% | 76.7% |
| Avigilon Corp ($AVO) | 49.3% | 54.2% | 56.6% | 57.4% | 52.0% |
| Stantec Inc ($STN) | 55.0% | 54.7% | 54.9% | 54.5% | 54.1% |
| IWG Technologies Inc ($IWG) | 53.3% | 54.0% | 49.0% | 47.8% | 54.9% |
| |
|---|
| Median (50 companies) | 23.6% | 23.4% | 21.7% | 21.7% | 22.2% |
|---|
Top companies by EBITDA margin, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Canadian National Railway Co ($CNR) | 46.5% | 45.9% | 46.8% | 50.9% | 54.3% |
| Badger Daylighting Ltd ($BAD) | 25.7% | 25.9% | 27.9% | 24.6% | 24.2% |
| IWG Technologies Inc ($IWG) | 12.7% | 25.5% | 20.0% | 24.0% | 26.9% |
| Winpak Ltd ($WPK) | 19.5% | 18.6% | 18.7% | 22.7% | 23.5% |
| CCL Industries Inc ($CCL.B) | 19.6% | 15.6% | 18.4% | 19.9% | 18.3% |
| |
|---|
| Median (53 companies) | 10.2% | 8.3% | 8.0% | 7.8% | 11.0% |
|---|
| Canadian Pacific Railway Ltd ($CP) | 26.1% | 32.4% | 43.7% | 48.9% | 51.6% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Newalta Corp ($NAL) | 21.7% | 34.5% | 35.1% | 42.0% | 9.6% |
| Cargojet Inc ($CJT.A) | 7.0% | 6.3% | 54.1% | 41.3% | |
| Algoma Central Corp ($ALC) | 15.9% | 7.3% | 5.0% | 27.4% | 58.2% |
| Canadian National Railway Co ($CNR) | 17.4% | 18.7% | 18.9% | 21.5% | 22.4% |
| ENTREC Corp ($ENT) | 35.0% | 26.7% | 29.5% | 18.0% | |
| |
|---|
| Median (54 companies) | 3.2% | 3.6% | 4.3% | 3.7% | 3.9% |
|---|
| Canadian Pacific Railway Ltd ($CP) | 20.2% | 20.2% | 21.9% | 22.7% | 19.0% |
Top companies by ROIC, %
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| IBI Group Inc ($IBG) | 4.8% | -9.0% | 11.6% | 21.9% | 26.2% |
| IWG Technologies Inc ($IWG) | 17.0% | 36.3% | 23.4% | 27.2% | 25.7% |
| Winpak Ltd ($WPK) | 20.4% | 18.0% | 18.3% | 22.6% | 21.8% |
| Toromont Industries Ltd ($TIH) | 28.8% | 25.8% | 24.3% | 23.5% | 21.7% |
| Intertape Polymer Group Inc ($ITP) | 12.3% | 13.7% | 22.5% | 23.0% | 21.0% |
| |
|---|
| Median (55 companies) | 12.2% | 9.6% | 11.0% | 8.3% | 8.5% |
|---|
| Canadian Pacific Railway Ltd ($CP) | 8.2% | 10.5% | 16.0% | 17.0% | 15.0% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2012 | FY2013 | FY2014 | FY2015 | FY2016 |
|---|
| Conifex Timber Inc ($CFF) | | 2.7x | 6.1x | 35.9x | 3.6x |
| Ag Growth International Inc ($AFN) | 2.9x | -0.1x | 2.1x | 14.1x | |
| Cargojet Inc ($CJT.A) | 1.5x | 1.5x | 31.5x | 12.9x | |
| Progressive Waste Solutions Ltd ($BIN) | 4.5x | 3.3x | 2.9x | 10.6x | 3.8x |
| Finning International Inc ($FTT) | 2.3x | 1.8x | 1.4x | 9.4x | 2.5x |
| |
|---|
| Median (49 companies) | 1.5x | 1.5x | 1.2x | 1.0x | 1.8x |
|---|
| Canadian Pacific Railway Ltd ($CP) | 2.9x | 2.3x | 1.9x | 2.5x | 2.6x |
