CANADIAN PACIFIC RAILWAY LTD. $208.83 (Toronto symbol CP; Shares outstanding: 161.0 million; Market cap: $34.0 billion; TSINetwork Rating: Above Average; Dividend yield: 0.7%; www.cpr.ca) transports freight over a 22,000-kilometre rail network between Montreal and Vancouver, as well as hubs in the U.S. Midwest and Northeast.
CP continues to benefit from lower fuel prices and an aggressive cost-cutting plan, but the slowing economy is hurting its freight volumes and revenue. That has caused the shares to fall about 14% from earlier this year.
In the three months ended June 30, 2015, the railway earned $404 million, up 8.9% from $371 million a year earlier. Per-share profits jumped 16.1%, to $2.45 from $2.11, on fewer shares outstanding.
Revenue fell 1.8%, to $1.65 billion from $1.68 billion. Gains from shipping chemicals, fertilizers and other products failed to offset lower shipments of crude oil, grains and metals.
Due to the slowing economy, CP expects its revenue to rise 2% to 3% for all of 2015, down from its earlier prediction of 7% to 8% growth.
The company also cut its 2015 earnings forecast to between $10.00 and $10.40 a share from $10.63. The stock trades at 20.5 times the midpoint of the new range. However, CP still expects to double its earnings per share from $8.50 in 2014 to $17.00 in 2018.
CP Rail is still a buy.
