CP Rail profits lag

Canadian Pacific Railway Ltd.says a series of expenses, ranging from a nine-day strike in May to management transition costs, contributed to weaker second-quarter earnings.

The railway operator reported net income fell to $103 million, or 60 cents per share, in the three months ended June 30. That compares to a profit of $128 million, or 75 cents per share, a year earlier.

The results also included a negative impact of 30 cents per share for management transition and advisory costs as well as a change in the corporate income tax rate in Ontario.

Canadian Pacific noted that a nine-day strike during the quarter reduced its diluted earnings per share by 25 cents to 30 cents earnings per share.

Operating ratio rises

The operating ratio was 82.5 per cent, an increase of 80 basis points. The lower the operating ratio, the better a railroad is seen to be performing.

Revenue increased to $1.37 billion from $1.27 billion.

The quarterly results are the first to be reported with new CEO Hunter Harrison at the helm of the storied railway.

"I look forward to working with a solid team of dedicated railroaders to improve CP's service offering and drive long-term shareholder value," Harrison said in a release.

"Canadian Pacific is a strong franchise with positive market opportunities."

Activist hedge fund Pershing Square Capital Management bought a 14 per cent stake in Canadian Pacific last fall and then agitated for months to oust then-CEO Fred Green.

Pershing Square CEO Bill Ackman argued the railway was languishing under Green's leadership and major changes at the top were necessary to get the company up to speed with its peers.

Ackman said Harrison, who retired as CEO of rival railway Canadian National Railway Co.in 2009, was the right man for the job and last month appointed him to the job.

Canadian Pacific transports coal, fertilizer, grain, automobiles, consumer goods and other materials across its North American rail network.