29 January 2010

CP Rail Chief Cautious About 2010

Fred Green, Canadian Pacific Railway Ltd. chief executive, remains the Cassandra of the North American railway industry, albeit one with an impressive track record for predicting what lies ahead.
 
In stark contrast to the rosy outlooks issued by some of his peers in recent weeks, Mr. Green said yesterday he remains cautious on what 2010 will bring as rail shipments continue to be impacted by high unemployment rates and low housing starts in the United States.
 
"Last year at this time, I was probably the most negative and arguably the facts came out consistent with that apprehension," Mr. Green said on a conference call. "You have to have some collateral damage in the Canadian economy, in my view, as a result of the biggest trading partner going through such a difficult and prolonged period."
 
By contrast, CP's larger domestic rival, Canadian National Railway Co. said earlier this week it expects a gradual recovery is underway and it believes "double-digit" earnings growth is possible in 2010 on the back of "high single-digit" volume growth.
 
"While we will be ready for that should it materialize," Mr. Green said, "those estimates are probably a little optimistic."
 
CP gave no earnings guidance of its own, saying there were too many variables, including whether its potash and metallurgical coal volumes will rebound. At this point, CP is expecting 2010 to be better than 2009, after sequential volume growth in recent months. But not near the peaks in 2007-2008.
 
The company's successful efforts to contain costs helped offset those declines, said Brian Yarbrough, Edward Jones analyst. Mr. Yarbrough said he's inclined to believe Mr. Green's more muted forecast for 2010 based on his track record. "I don't think he thought it was going to be this bad, but he called it by six or months before anyone else."