Canadian Pacific Railway Ltd. $61 - Toronto symbol CP

CANADIAN PACIFIC RAILWAY LTD. $61 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 155.1 million; Market cap: $9.5 billion; SI Rating: Above average) transports freight over a rail network between Montreal and Vancouver. It also connects to major hubs in the United States. Due to rising fuel costs and lower shipments of automobiles and forest products, CP’s earnings in the second quarter of 2008 fell 13.4%, to $0.97 a share from $1.12 a year earlier. These figures exclude non-recurring items. Revenue was unchanged at $1.2 billion. CP’s operating ratio (regular operating costs divided by revenue — the lower, the better) rose to 79.4% from 74.7%. The company now aims to improve its long-term efficiency by increasing average train speeds, sharing more tracks with other railways and reducing waiting times in terminals. CP now expects to complete its purchase of U.S.-based railway Dakota, Minnesota & Eastern Railroad by the end of October, 2008. The purchase should add $0.16 a share to its 2008 earnings. Excluding acquisitions, CP should earn $4.12 a share in 2008. The stock trades at 14.8 times that figure. The $0.99 dividend yields 1.6%. CP Rail is a buy.

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