CANADIAN PACIFIC RAILWAY LTD - Toronto symbol CP

CANADIAN PACIFIC RAILWAY LTD. $129 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 175.0 million; Market cap: $22.6 billion; Price-to-sales ratio: 3.9; Dividend yield: 1.1%; TSINetwork Rating: Above Average; www.cpr.ca) expects to ship 70,000 carloads of crude oil in 2013, up sharply from just 13,000 in 2011.

However, the crash could hurt the oil-by-rail boom. (Note: Montreal, Maine and Atlantic Ltd., operated the train involved in the crash, not CP.)

It seems likely that regulators will require railways to replace their current tanker cars with models that can better withstand collisions. They may also demand that railways place more workers on their trains, and install automatic-braking equipment.

Installing new equipment could make it harder for CP to achieve its cost-cutting targets. The company aims to cut its operating ratio from 75.8% in the first quarter of 2013 to 65% in 2016 (Operating ratio is calculated by dividing a company’s regular operating costs by its revenue. The lower the ratio, the better.)

Still, any new rules would apply to all railways. Moreover, crude oil accounts for just a small fraction of CP’s overall business.

CP Rail is still a buy.

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