CANADIAN PACIFIC RAILWAY LTD. $61 - Toronto symbol CP

CANADIAN PACIFIC RAILWAY LTD. $61 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 169.4 million; Market cap: $10.3 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.cpr.ca) transports freight between Montreal and Vancouver. It also connects with major hubs in the U.S. Midwest and Northeast. In the three months ended March 31, 2011, CP’s earnings per share fell 66.7%, to $0.20 from $0.60 a year earlier. That’s mainly because a strike at Teck Resources Ltd. (Toronto symbol TCK.B) cut coal shipments (CP is Teck’s main railway). Bad winter weather in B.C. and a 28% jump in fuel prices also weighed on its earnings. CP’s revenue was unchanged at $1.2 billion. CP’s operating ratio worsened to 90.6% from 82.3% a year earlier. The company feels it can lower its operating ratio to around 70% in the next two to four years, mainly by increasing the speed and length of its trains. CP is also introducing new surcharges to help offset its higher fuel costs. CP shares trade at 15.7 times the $3.89 a share that the company will probably earn in 2011. CP Rail is a buy.

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