Canadian Pacific CEO Exit: 'Never A Dull Moment In Calgary'

Canadian Pacific Railway Limited (USA) CP unexpectedly announced the departure of CEO Hunter Harrison, more than five months prior to the expiration of his contract. The news “just accelerates a transition that has been in place for some time,” Loop Capital's Rick Paterson said in a report.

With the departure, Harrison has left behind C$118 million in forfeited awards and benefits, Paterson mentioned. Following the announcement, Dow Jones reported a potential tie up with former board member and ex-Pershing Square activist Paul Hilal, “with the goal of making a run” at CSX Corporation CSX.

One of the conspiracy theories is that Hunter Harrison and Keith Creel had approached both CSX and Norfolk Southern Corp. NSC in recent years with the intention of a merger, but were met with refusals. A subsequent hostile run at Norfolk had failed.

“If news reports are true and Mr. Harrison is successful with CSX, a CSX-CP combination would not be hostile and only the regulators would stand in the way,” Paterson commented.

Q4 Results

Canadian Pacific reported Q4 results, with revenue of C$1.64 billion on flat year-over-year volumes and 3 percent core price growth. The operating ratio came in at 56.2 percent, below the 59.9 percent reported in Q4 2015.

The analyst lowered the EPS estimates for 2017 and 2018 from $12.00 to $11.44 and from $13.37 to $12.70 for 2018, respectively, following Canadian Pacific’s conservative 2017 EPS guidance.

Loop Capital has a Buy rating on Canadian Pacific, and has reduced the price target from $221 to $210.

"Never a dull moment in Calgary," Paterson quipped.