CANADIAN PACIFIC RAILWAY LTD. $65 (Toronto symbol CP; SI Rating: Average) transports freight over a rail network between Montreal and Vancouver. In the United States, subsidiaries connect CP’s Canadian lines to major hubs in the Midwest and Northeast. Alliances with other railways extend its reach to Mexico. In the three months ended June 30, 2008, CP’s revenue was unchanged at $1.2 billion. The lower U.S. dollar and lower shipments of automobiles and forest products slowed revenue growth. Earnings before one-time items fell 13.4%, to $0.97 a share from $1.12. CP’s profits dropped, despite steady revenues, partly from costs related to the U.S. Midwest flooding, but mostly due to higher fuel costs. However, by the end this year, CP expects to have provisions in all of its contracts to let it pass on fuel price increases. It also aims to improve long-term efficiency with several new initiatives, including sharing more tracks with other railways, as well as better scheduling. CP Rail now expects to earn between $4.00 and $4.20 a share in 2008, down from its previous range of $4.40 to $4.60. The stock now trades at a reasonable 15.9 times the midpoint of the new range. The company’s annual dividend rate of $0.99 yields 1.5%. CP’s shipments of coal, industrial and consumer products remain strong. A recovery in other shipments would just add to its appeal. Canadian Pacific Railway is still a safety-conscious buy.
Canadian Pacific Railway Ltd. $65 - Toronto symbol CP
A professional investment analyst for more than 30 years, Pat has developed a stock-selection technique that has proven reliable in both bull and bear markets. His proprietary ValuVesting System™ focuses on stocks that provide exceptional quality at relatively low prices. Many savvy investors and industry leaders consider it the most powerful stock-picking method ever created.