Canadian Tire has offered our investors so much more than hammers and nails. The stock’s up over 914% since we first recommended it in The Successful Investor in April 1995.
A strong long-term growth plan that includes store, online business and private-label brand upgrades should help renew its momentum and provide a basis for further long-term gains.
The current 4.9% dividend yield is just as impressive as the share price gains when you consider just how inexpensive the shares are right now.
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They trade at just 12.7 times its 2024 forecast earnings.
CANADIAN TIRE CORP. (Toronto symbol CTC.A; www.canadiantire.ca) operates 502 Canadian Tire stores. They sell automotive parts and services, and household and sporting goods; franchisees run most of the locations. The company’s other operations also enrich its outlook. They include 161 stores operating under the PartSource (auto parts) and Party City (party supplies) banners.
Canadian Tire has several other major retail chains: Mark’s sells casual and work clothing through 380 stores; and the Sport Chek Group sells sporting goods and athletic wear through 369 outlets, including Sport Chek and Sports Experts.
Notably, the company’s Mark’s chain now plans to open four new stores under the Mark’s WorkPro banner in Edmonton, Toronto, Montreal and St. Catharines, Ontario. These new stores will focus on industrial customers, such as construction workers. Specialized stores like these will help Canadian Tire cope as consumers spend less on non-essential items due to rising interest rates and inflation.
Canadian Tire also provides a variety of banking services, including savings accounts, guaranteed investment certificates (GICs), insurance and credit cards.
In October 2014, the company sold 20% of its Canadian Tire Financial Services business to Bank of Nova Scotia (see below) for $476.8 million.
Canadian Tire has now re-acquired that 20% stake for $895 million. Meanwhile, the transaction will add to Canadian Tire’s 2024 earnings. As well, gaining full control over the financial services division will make it easier to integrate its Triangle customer loyalty program with its credit card business. That should encourage repeat visits and more spending per visit. (The Triangle plan currently has over 11 million active members, which includes 2.3 million credit card holders.)
Canadian Tire also announced that it is conducting a strategic review of the financial services division. That could lead to the sale of shares in this business, or even a spinoff. It expects to complete the review in 2024.
With the March 2024 payment, the company raised your quarterly dividend by 1.4%. Shareholders now receive $1.75 a share instead of $1.725. The new annual rate of $7.00 yields a high 4.9%. With this increase, the company has now raised that payment each year for the past 14 years. Including this latest increase, the company has now raised the dividend by an average of 11.0% annually over the last 5 years.
What’s more, Canadian Tire now plans to buy back $200.0 million of its class A shares in 2024. That’s on top of the $470.0 million it spent on buybacks under the previous plan.
Value Stocks: Revenue and earnings are enhanced by Canadian Tire’s e-commerce gains
Canadian Tire’s revenue rose 3.4%, from $14.06 billion in 2018 to $14.53 billion in 2019. In 2020, revenue growth slowed as the pandemic took hold, rising just 2.3% to $14.87 billion. Revenue then jumped 9.6% to $16.29 billion in 2021 as the economy re-opened. In 2022, revenue then climbed a further 9.3%, to $17.81 billion. In 2023, revenue then fell 6.5%, to $16.66 billion, mostly due to lower consumer confidence hurting demand.
The company’s earnings rose 6.1%, from $870.4 million, or $11.95 a share, in 2018 to $923.3 million, or $13.04 a share, in 2019. In 2020, earnings fell 2.0% to $904.9 million, or $13.00 a share. The company incurred added costs as the pandemic shut stores. Earnings then jumped 42.6% to $1.29 billion, or $18.91 a share, in 2021 as the economy re-opened. In 2022, despite the higher revenue, earnings fell 3.1%, to $1.25 billion, or $18.75 a share. That was due in part to the company making strategic investments relating to its BetterConnected strategy. As well, it incurred higher supply-chain and other costs. In 2023, earnings fell 42.8%, to $716.1 million, or $10.37 a share. Profits fell along with sales, as well as higher costs.
Canadian Tire reported better-than-expected sales and earnings for the first quarter of 2024, despite weaker sales of winter-related goods such as snow shovels and boots.
The company’s revenue in the quarter ended March 30, 2024, fell 4.9%, to $3.52 billion from $3.71 billion a year earlier. That topped the consensus forecast of $3.51 billion.
Overall same-store sales declined 1.6%. At the main Canadian Tire chain, same-store sales also fell 0.6% as lower demand for household goods offset better sales of automotive and gardening products.
Same-store sales also declined 6.5% at Sport Chek on lower sales of skiwear, snowboards and other athletic clothing and footwear. Lower demand for winter clothing also cut same-store sales at Mark’s by 1.2%.
E-commerce sales totalled $1.1 billion in the past 12 months. That’s equal to 7% of the company’s total retail sales over that same period.
If you factor out unusual items, Canadian Tire’s earnings in the quarter rose 33.3%, to $76.8 million from $49.8 million a year earlier. Due to fewer shares outstanding, per-share earnings improved at a faster pace of 38.0%, to $1.38 from $1.00. That was also much better than the consensus estimate of $0.68.
Part of that earnings gain is due to the company’s plan to improve productivity, including cutting 3% of its workforce.
Canadian Tire’s long-term outlook remains bright. It continues to make progress on its new long-term growth plan, including upgrading its stores, online businesses and private-label brands. Since March 2022, it has refreshed or upgraded more than 15% of its Canadian Tire stores. So far, those improvements are driving higher customer traffic and sales at those upgraded stores.
Canadian Tire will probably earn $11.19 a share in 2024, and the stock trades at 12.7 times that estimate.
We hope you benefited from this analysis of Canadian Tire. The company is just one of the top-performing stock picks of our Successful Investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
This post was originally published in April 2023 and is regularly updated.
Fair Isaac is a stock that’s rocketed 89.8% for our subscribers over the last year.
Even better, it’s up a whopping 11,765.5%since we first recommended it in February 1999!
We think the shares still have room to move much higher as the firm continues to develop new software products for international markets. Get it now and continue to grow with this Power Buy!
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Canadian Growth Stocks: CGI Group, CAE Inc., Fortis Inc. Stock and more.
FAIR ISAAC CORP. (New York symbol FICO; www.fairisaac.com) is best known for its FICO Scores software. It lets lenders make better decisions about customer creditworthiness. Through your shares, you also benefit from the company’s programs to help credit-card issuers reduce fraud and analyze the spending patterns of cardholders.
We were early to identify that business model as a winning strategy—one with the potential to offer our subscribers strong and sustainable gains. We haven’t been disappointed: Since we first recommended Fair Isaac as a buy in February 1999, the stock is up a whopping 11,765.5%. In the last year alone it has gained 89.8% even as the Dow Jones Industrial Average is up just 12.7% in that time.
Fair Isaac’s revenue rose steadily over the six years from 2018 to 2023. Revenue increased 46.6%, from $1.03 billion in 2018 (fiscal years end September 30), to $1.51 billion in 2023.
Excluding one-time items, earnings climbed 157.3% as the company expanded into higher-profit-margin services. Earnings rose from $194.3 million, or $6.23 a share, in 2018, to $500.0 million, or $19.71 a share, in fiscal 2023.
For the quarter ended March 31, 2024, revenue rose 14.1%, to $433.8 million from $380.3 million a year earlier. Software revenues, which include the company’s analytics and digital decision-making technology, were up 8%.
Meanwhile, Scores revenue, which includes the company’s business-to-business (B2B) scoring solutions and its business-to-consumer (B2C) solutions, jumped 18%.
Excluding one-time items, Fair Isaac earned $154.5 million in the quarter. That was up 27.2% from $121.4 million. Per-share earnings jumped 28.5%, to $6.14 from $4.78, on fewer shares outstanding.
The company continues to see its shares as undervalued—and plans to keep buying back its stock. In the fiscal year ended September 30, 2022, it bought back $1.1 billion in shares; in the fiscal year ended September 30, 2023, it repurchased $405.5 million in shares. In the first six months of fiscal 2024, it bought back a further $243.5 million.
Stock buybacks reduce the number of shares outstanding. That boosts earnings per share since profit is then divided among fewer shares. The higher per-share earnings make the stock more attractive to investors and that spurs the share price.
Growth Stocks: High R&D should boost domestic and international earnings for Fair Isaac
Fair Isaac spends a high 11% of its revenue on research and development. Note that the high research spending makes the company appear less profitable than it really is. That’s because R&D gets written off against earnings in the year in which it is spent. The current level of R&D investment helps the company stay ahead of changes in the industry and will pay off in faster sales and earnings growth.
In response to rising unemployment during the pandemic, Fair Isaac launched the FICO Resilience Index. This Index takes into account general economic conditions to measure a borrower’s ability to weather periods of economic disruption or volatility. When lenders use it along with existing FICO tools, they can better identify borrowers who have a lower FICO Score but are still well positioned to take on more debt.
Right now, just 28% of the company’s revenue is derived from business outside the U.S., and international growth represents a significant growth area.
Meanwhile, Fair Isaac’s applications business will continue to gain longer term from expanding demand for fraud and digital security software. What’s more, it has formed a strategic partnership with Equifax, the major U.S. credit reporting firm. This includes selling to banks the consumer data it gathers from clients.
In the short term, it’s possible that demand for the company’s credit scoring solutions will weaken as high interest rates slow home buying. Still, demand from automotive and personal-lending clients should hold up well. At the same time, those new credit-scoring products for international use look extremely promising.
We hope you benefited from this analysis of Fair Isaac Corp. The company is just one of the top-performing stock picks of our Power Growth Investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
This post was originally published in 2023 and is regularly updated.
Under pressure from the federal government, Canada’s leading grocery chains like Metro have agreed to a series of measures to lower prices for consumers. Those include discounts, price-matching campaigns, and price freezes. The government is also looking at ways to get food producers to lower their prices.
We feel this firm, which has embraced new industry consumer standards, is well positioned to adapt. Moreover, its new automated distribution centres are poised to lower its costs and lift its long-term profitability.
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METRO INC., (Toronto symbol MRU) operates 992 grocery stores and 641 drugstores, in Quebec, Ontario and New Brunswick.
The company began operating in 1947 as Magasins Lasalle Stores ltée after a group of independent grocery retailers joined forces to secure bulk discounts from their suppliers.
Over the next few years, the company added other affiliated grocers. It merged with the Marché Richelieu grocery chain in 1975 to form Groupe Metro-Richelieu Inc.
The company later changed its name to Metro-Richelieu Inc. (and later to Metro Inc.) and listed its shares on the Montreal Stock Exchange in 1986, and on the Toronto Stock Exchange in 1993.
We first recommended Metro (then called Metro-Richelieu) in the second issue of our Power Growth Investor newsletter (then called Stock Pickers Digest) in July 1998 at $20.05 a share ($3.54 after a 2-for-1 split in February 2002, and a 3-for-1 split in February 2015).
The stock is now up an amazing 2,357.4% since then.
Meanwhile, in December 2007, we moved Metro from Stock Pickers Digest to The Successful Investor, our publication for more conservative investors. The move reflected both its new status as a larger-cap stock and its established dividend history.
Growth Stocks: Two purchases triggered massive gains for Metro’s shareholders
The company has made a series of acquisitions over the years that have helped it compete with bigger food chains. The most significant were the purchases of A&P Canada and Jean Coutu Group.
In 2005, Metro expanded outside of Quebec with its $1.7 billion acquisition of A&P Canada. A&P Canada operated 244 food stores throughout Ontario under the A&P, Dominion, Food Basics, The Barn and Ultra Food & Drug banners.
The company’s biggest acquisition came in May 2018, with Metro’s purchase of Quebec-based drugstore chain Jean Coutu Group. That chain also makes generic pharmaceutical drugs through its Pro Doc business. Metro paid $4.5 billion—75% in cash and 25% in Metro common shares.
Growth Stocks: Automation will help cut Metro’s labour costs
In August 2023, the company agreed to a new contract with the union representing 3,700 workers at 27 supermarkets in the Greater Toronto Area. That ended a five-week strike. While the new contract will raise Metro’s costs, labour peace helps cut its risk. The company’s strong market share should also let it pass along most of these higher costs to its customers.
At the same time, Metro is using automation to cut its labour costs. For example, in 2022 it opened a new $400 million distribution centre in Toronto that uses automated equipment to handle fresh and frozen foods.
In November 2023, it then opened its $420 million automated distribution centre for fresh and frozen products in Terrebonne, Quebec, just north of Montreal. With a total surface area of over 600,000 square feet, the equivalent of more than 10 football fields, the nine-storey building houses two distinct temperature-controlled zones for some 7,000 fresh and frozen products. Employees are also able to enjoy a cafeteria with meals cooked on site, a fitness room and a daycare centre that will open its doors this year.
Meanwhile, Metro’s enhanced loyalty program should continue to pay off. In May 2023, the company launched its new MOI rewards program across all of its supermarkets and pharmacies. Subsequently, the company’s Jean Coutu drugstore chain withdrew from the Air Miles loyalty reward program to focus on the MOI loyalty program. As a result, Metro wrote down the value of the Air Miles program by $44.1 million.
All in all, the MOI program should help encourage more repeat visits and higher spending per visit. It gives Metro insight into the buying habits of loyal customers, and lets it offer them personalized promotions to increase their purchases at its stores.
Metro recently formed a new alliance with AddÉnergie Technologies Inc. (which operates as Flo). Under this deal, Flo will install more than 500 of its ultra-fast-charging electric vehicle (EV) charging stations at 130 of Metro’s stores in Ontario and Quebec.
Flo will begin installing these chargers in August, and it should complete the project over the next three years. It will own and operate these new stations.
For Metro, the chargers should help it attract more customers who drive EVs, and help it reach its greenhouse gas reduction targets.
Growth Stocks: Both revenue and earnings keep climbing each year
As a result of the Jean Coutu purchase, Metro’s sales rose 16.6%, from $14.38 billion in 2018 to $16.77 billion in 2019 (fiscal years ended September 30). Revenue then rose 7.3% in 2020 to $18.00 billion. In 2021, revenue then climbed 1.6%, to $18.28 billion. Revenue then rose a further 3.3% in 2022 to $18.89 billion. In 2023, revenue increased 9.7%, to $20.72 billion.
Overall earnings rose 26.3%, from $579.2 million, or $2.41 a share, in 2018 to $731.6 million, or $2.84 a share, in 2019 (fiscal years ended September 30). Earnings climbed 13.3% in 2020 to $829.1 million, or $3.27 a share. In 2021, earnings rose again, 3.0% to $854.2 million, or $3.44 a share. Earnings increased a further 7.9% in 2022, to $922.1 million, or $3.82 a share, before rising 9.2%, to $1.01 billion, or $4.30 a share, in 2023.
Meanwhile, in the fiscal 2024 second quarter, ended March 16, 2024, overall sales rose 2.2%, to $4.66 billion from $4.55 billion a year earlier. That matched the consensus forecast.
Same-store sales at Metro’s food stores rose 0.2%. However, if you factor in the timing of the Christmas holiday compared to the year-earlier quarter, comparable same-store sales improved 2.7%. The higher same-store sales are mainly because Metro increased its selling prices by 3.0% in response to rising costs for merchandise, transportation and labour.
Same-store sales at the company’s drugstores also improved 5.9%. That reflects a 6.0% increase in prescription drug sales, as well as a 5.8% gain in sales of other products, particularly cough and cold remedies.
Metro also announced that it is replacing the Air Miles loyalty plan at its Ontario stores with its own Moi Rewards plan. That triggered a $20.8 million writedown of assets related to the Air Miles program.
If you exclude that charge and other unusual items, Metro’s overall earnings in the latest quarter fell 8.4%, to $206.4 million from $225.4 million a year earlier. Due to fewer shares outstanding, earnings per share declined at a slower rate of 5.2%, to $0.91 from $0.96. That still beat the consensus estimate of $0.89 a share.
The lower overall earnings are largely due to the construction and start-up of Metro’s new automated distribution centres in Montreal and Toronto (see above).
Growth Stocks: Pandemic triggered many positive changes for future
We feel Metro’s new initiatives, which the pandemic accelerated, set it up for more growth. They include expanding its online ordering and home delivery services as well as its customer loyalty plans.
The company also aims to lower its operating costs with new automated warehouses and self-serve checkouts. Any improvements there are a big gain for supermarkets, which have much lower profit margins than other industries.
At the same time, Metro’s earnings should continue to improve, even if consumers shift to lower-priced products. That’s because it owns the discount Food Basics chain as well as several private-label brands (Selection and Irresistibles).
The company expects the costs to shift its current operations to its new automated facilities will cut its earnings for all of fiscal 2024 by roughly $0.06 a share to $4.26. The stock trades at a reasonable 19.2 times that forecast. However, beyond fiscal 2024, Metro expects its annual earnings per share will rise between 8% and 10%.
In fact, the company is so confident of its future prospects that it has just raised your quarterly dividend by 10.7%. Starting with the March 2024 payment, investors receive $0.335 a share instead of $0.3025. The new annual rate of $1.34 yields 1.6%. Metro has a long history of rewarding investors: it has raised its dividend each year for 30 years.
We hope you benefited from this analysis of Metro Inc. The company is just one of the top-performing stock picks of our The Successful Investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
Subscribe to The Successful Investor so you can access many more market-leading Buy recommendations for maximum returns.
On June 22, 2017, Brookfield Asset Management Inc. (now Brookfield Corp.) spun off its specialty insurance business as Trisura Group.
Today this specialty insurer is a sterling example of why we love spinoffs and the power they have to outperform their competitors. We first recommended this firm on December 2017 at $27.00—just $6.75 when you adjust for a subsequent 4-1 share split.
This power growth stock is now up a whopping 528% for our subscribers.
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Canadian Growth Stocks: CGI Group, CAE Inc., Fortis Inc. Stock and more.
TRISURA GROUP LTD. (Toronto symbol TSU; www.trisura.com) took its current form on June 22, 2017, when Brookfield Asset Management Inc. (now Brookfield Corp.) spun off its specialty insurance business as Trisura. Investors received one Trisura share for every 170 Brookfield shares they held.
The company provides specialty insurance and services not available through traditional insurers.
Claims under these policies are less frequent, but can be much higher.
Trisura cuts that risk with reinsurance contracts. The company uses that coverage, purchased from another insurance provider, to insulate itself (at least in part) from the risk of a major claims event.
Trisura has three main subsidiaries: Trisura Canada sells property and casualty insurance products in Canada; Trisura U.S. focuses on the U.S. market; and Trisura International, based in the Barbados, sells reinsurance products.
The company’s revenue rose strongly between 2018 and 2023 on a mix of increased business for its existing operations as well as its acquisition of smaller specialty insurers and brokerages. Revenue jumped 104.6%, from $219.0 million in 2018 to $448.3 million in 2019. Revenue then increased 106.7% in 2020, to $926.4 million, before climbing a further 68.7% in 2021, to $1.6 billion. In 2022, revenue then shot up 28.9%, to $2.0 billion. In 2023, revenue climbed a further 38.4%, to $2.8 billion.
Trisura’s earnings before one-time items also jumped over the six years—from $8.6 million, or $0.32 a share (adjusted for Trisura’s 4-for-1 share split in July 2021), in 2018 to $110.2 million, or $2.34 a share, in 2023.
In the quarter ended March 31, 2024, the company’s revenue jumped 16.5%, to $744.3 million from $639.1 million a year earlier. That gain was due to higher premiums written in both Canada and the U.S.
Earnings (excluding one-time items) rose by 16.0%, to $33.2 million, up from $28.6 million. Due to more shares outstanding, earnings per share improved 11.5%, to $0.68 from $0.61.
The combined ratio for Trisura’s Canadian business rose to 81.8% in the latest quarter from 80.7% a year earlier. (The ratio represents claims that the company paid out divided by the premiums it took in. The lower, the better).
Growth Stocks: Modest valuation and visibility suggest even higher share prices for Trisura Group
Notably, the company has no controlling shareholder, so its improving market share and relatively small market cap could make it a highly attractive takeover target for a larger financial-services firm. That’s not reason enough to buy, but it adds to the stock’s appeal.
The stock is now just 11.5% below the peak of $47.90 it hit in December 2022, and it’s up an impressive 681% since the 2017 spinoff. Our subscribers who bought the stock when we first recommended it in December 2017 at $27.00 (or $6.75 when you adjust for a subsequent 4-1 share split) have enjoyed a 528% gain! We think they can expect much more growth in the coming years.
Trisura’s outlook remains bright, and the stock trades at a low 15.3 times the 2024 forecast of $2.78 a share.
And yet the stock gets little coverage. That illustrates the importance of the third part of our multi-prong approach to investing—to downplay stocks in the media/broker limelight. (The other two parts are to (1) invest in well-established companies; and (2) spread your money across most if not all of the five main economic sectors.)
We feel Trisura’s strong prospects could push the stock even higher and also encourage the company to start paying dividends. Its relatively small size could also turn it into an attractive takeover target for a larger industry player.
We hope you benefited from this analysis of Trisura Group. The company is just one of the top-performing stock picks of our Spinoffs & Takeovers newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
This post was originally published in 2023 and is regularly updated.
Nvidia has delivered a whopping 82,623.2%return to our subscribers since we first recommended it in the July 2002 issue of Wall Street Stock Forecaster at $0.14317 per share (adjusted for share splits).
Over the last year alone, the shares are up 163.2%. In comparison, the S&P 500 offered only a 23.8% gain.
We feel now—ahead of the next cyclical upswing—is a good time to add high-quality tech stocks with solid long-term outlooks. This stock is a buy.
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NVIDIA CORP. (Nasdaq symbol NVDA) is a leading designer of 3D-capable video chips; they make video games run more smoothly and appear more lifelike. Nvidia has also adapted its chips for other applications, including artificial intelligence (AI), datacentres and self-driving cars.
The U.S. government recently imposed new restrictions that prevent chipmakers from selling advanced chips for artificial intelligence (AI) applications to customers in China and Russia. The company no longer sells chips to customers in Russia, but halting exports to China will cut its quarterly sales by $400 million.
Despite this setback, Nvidia’s long-term outlook remains bright. Its AI chips are the clear leaders in this emerging market, and it will probably re-configure its non-AI chips for its datacentre customers in China.
In its fiscal 2025 first quarter, ended April 28, 2024, Nvidia’s revenue soared 262.1%, to $26.04 billion from $7.19 billion a year earlier. That easily beat the consensus forecast of $24.65 billion.
Earnings before unusual items also jumped 461.5% in the quarter, to $0.612 a share (or a total of $15.24 billion) from $0.109 a share (or $2.71 billion). That also beat the consensus estimate of $0.559.
Nvidia has split its shares on a 10-for-1 basis, which makes the stock more affordable for individual investors and the company’s employees. The split took effect on June 10, 2024.
Growth Stocks: Nvidia’s high R&D spending should keep producing high-demand products
Nvidia continues to spend heavily on the development of new products. In the latest quarter, its research costs rose 45.1% to $2.72 billion, or a high 10.4% of its revenue.
Thanks to that spending, the company recently launched its Blackwell AI platform and chips, which use 25% less energy than its preceding chips. Major computing firms such as Alphabet (Google), Amazon.com, Microsoft, Dell, Oracle and Meta Platforms now plan to use the Blackwell platform to run their AI applications.
The stock has jumped 163.2% over the last year. That’s after the company has reported better-than-expected results but also increased its forecasts going forward. Those revisions are largely due to strong demand for chips that power AI applications, such as the popular ChatGPT online chatbot/search engine.
Nvidia has split its shares on a 10-for-1 basis, which makes the stock more affordable for individual investors and the company’s employees. The split took effect on June 10, 2024.
The stock now trades at 43.9 times its forecast fiscal 2025 earnings of $2.70 a share. That’s a high P/E, but acceptable in light of the company’s market leadership. As well, the shift to AI will require datacentres to replace traditional CPU (central processing unit) chips with Nvidia’s faster GPU (graphics processing unit) chips over the next few years.
Moreover, the company raised your quarterly dividend by 150.0% with the June 28, 2024, payment, to $0.01 a share (post-split). The stock has already gained 143% since the start of 2024, which is why the new annual rate of $0.04 (post-split) yields just 0.03%.
We hope you benefited from this analysis of Nvidia Corp. The company is just one of the top-performing stock picks of our Wall Street Stock Forecaster newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
This safety-conscious publication offers you many more market-leading Buy recommendations for maximum returns.
This post was originally published in April 2023 and is regularly updated.
Even before the phenomenal industry-wide gains of 2022, Imperial Oil was a long-term buy for our subscribers.
In fact, the stock has delivered a 1,598.1% gain for our investors since we first recommended it as a buy in April 1995.
We love this Canadian giant because it adds to its gains in periods of both high and low oil prices. At the same time, the stability of its integrated operations backs a solid 2.5% dividend yield.
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Meanwhile, cash flow at this top oil producer remains strong. This lets it return more of that cash to its shareholders.
The shares currently trade at just 8.0 times forecast cash flow.
IMPERIAL OIL LTD. (Toronto symbol IMO; www.imperialoil.ca) gets about 90% of its production from oil sands operations in Alberta. Other operations include three refineries (one in Alberta and two in Ontario) and a petrochemical plant in Sarnia, Ontario. It also supplies gasoline to over 2,000 Esso and Mobil gas stations in Canada. ExxonMobil (New York symbol XOM) owns 69.6% of the company’s shares.
The company recently announced that it will build a “renewable” diesel fuel complex at its Strathcona refinery near Edmonton.
Renewable diesel is a biofuel produced from wood, crops and vegetable oils. The new facility will produce 20,000 barrels a day of renewable diesel when it begins operating in 2025.
Imperial will spend $720 million on this project. Some of those costs are included in the company’s previously announced plan to spend $1.7 billion on capital upgrades and exploration in 2023.
Energy Stocks: Imperial Oil’s payout, revenue and cash flow all improve
With the April 2024 payment, Imperial raised your quarterly dividend by 20.0%, to $0.60 a share from $0.50. The new annual rate of $2.40 yields 2.5%.
With this latest increase, Imperial has now raised its dividend by an average of 25.9% annually over the past 5 years. Its TSI Dividend Sustainability Rating is Above Average.
Imperial Oil’s revenue climbed 39.6%, from $25.0 billion in 2016 to $35.0 billion in 2018. Revenue dropped 2.8% in 2019, to $34.0 billion. That was mainly because the Government of Alberta announced mandatory reductions in 2019 to oil and bitumen production in an attempt to narrow the price differential received for Alberta oil and bitumen compared to higher North American benchmark prices.
Revenue then fell 34.5% in 2020, to $22.3 billion. Energy prices fell along with a pandemic-induced slowdown in consumer and commercial activity. That included a steep decline in demand for gasoline, and an even sharper fall in jet-fuel prices. Revenue then rebounded by 68.3% in 2021, to $37.5 billion, as energy prices rose along with an improving global economy. Imperial’s revenue then took a big jump in 2022, climbing 58.7% to $59.7 billion along with much stronger oil and gas prices. In 2023, revenue fell 14.6%, to $51.0 billion. That decline was mostly due to lower oil and gas prices.
The company’s cash flow also rose between 2016 and 2018. Specifically, it climbed 177.9%, from $1.7 billion, or $1.96 a share, in 2016 to $4.6 billion, or $5.72 a share, 2018. Cash flow fell 23.9% in 2019 to $3.5 billion, or $4.61 a share. In 2020, cash flow dropped 75.0% to $880.0 million, or $1.20 a share. In 2021, cash flow rose sharply to $4.5 billion, or $6.32 a share. Cash flow then jumped another 100.1% in 2022 to $9.0 billion, or $14.06 a share. In 2023, cash flow then fell along with revenue, by 28.5%, to $6.4 billion, or $11.20 a share.
In the quarter ended March 31, 2024, Imperial produced an average 421,000 barrels of oil equivalent per day. That’s up 1.9% from 413,000 a year earlier. Revenue rose 1.3%, to $12.28 billion from $12.12 billion. Cash flow fell 2.1%, to $1.52 billion from $1.55 billion. On fewer shares outstanding, cash flow per share rose 6.8%, to $2.84 from $2.66.
Cash flow also dropped, down 26.6% to $1.80 billion from $2.45 billion. Due to fewer shares outstanding, cash flow per share declined at a slower rate of 20.2%, to $3.25 from $4.07.
Imperial’s long-term debt of $4.0 billion is a low 7.7% of its market cap. It also holds cash of $1.2 billion.
Imperial now plans to spend $1.70 billion on capital upgrades and exploration in 2024, down from $1.78 billion in 2023. The company also expects to produce between 420,000 and 442,000 barrels a day in 2024. The midpoint of that range—431,000—is about 4% higher than its production of 413,000 barrels a day for all of 2023.
Higher output and improving productivity will probably lift the company’s projected cash flow per share to $11.98 in 2024. The stock trades at just 8.0 times that estimate.
We hope you benefited from this analysis of Imperial Oil. The company is just one of the top-performing stock picks of our Dividend Advisor investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
This post was originally published in April 2023 and is regularly updated.
When we made Alimentation Couche-Tard our Stock of the Year for Stock Pickers Digest (now Power Growth Investor) in 2012, it rose more than 60% that year. Is ATD a good stock to buy? Let’s explore further.
Yet it wasn’t an isolated surge – since we first recommended it in 2008, the shares are up a whopping 3,033.6%!
This solid, 40-year-old niche retailer operates some 14,600 stores in Europe and North America. It not only adapted to the pandemic—it thrived. It’s done a brilliant job of making acquisitions pay off in Canada, the U.S., and Europe too.
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Its latest purchase adds another high-demand element to its business, one that lets the company cross-sell its services. This firm is well positioned to keep prospering in its markets. That means its share price has lots of room to move higher. Is ATD a good stock to buy? The evidence suggests it might be.
It’s also relatively cheap at 19.6 times forecast earnings.
ALIMENTATION COUCHE-TARD INC. (Symbol ATD on Toronto; www.couche-tard.com) operates 14,545 convenience stores across North America and Europe.
In early January 2024, Couche-Tard completed the acquisition of retail assets in Europe from French energy giant TotalEnergies SE for 3.1 billion euros ($4.5 million Cdn.).
The assets include TotalEnergies’ retail networks in Germany and the Netherlands, comprising more than 1,500 service stations.
TotalEnergies and Couche-Tard have also formed a joint venture to own and operate over 600 service stations in Belgium and Luxembourg. The joint venture is 60% owned by Couche-Tard and 40% owned by TotalEnergies.
TotalEnergies believes that the partnership will maximize the stations’ non-fuel sales. The service stations in the four countries will remain under the TotalEnergies banner as long as the fuel is supplied by the company, for at least five years.
For Couche-Tard, the deal lets it grow further in Europe by expanding in some of that continent’s strongest economies.
Driven by acquisitions, including the June 2017 purchase of CST Brands for $4.4 billion, Couche-Tard’s revenue jumped 73.3% from $34.14 billion in fiscal 2016 (fiscal years end April 30) to $59.18 billion for fiscal 2019 (all figures except share price in U.S. dollars). For fiscal 2020, revenue then fell 8.5% to $54.13 billion. The decline was mainly due to lower fuel demand as the COVID-19 pandemic took hold. In fiscal 2021, revenue dropped a further 15.5%, to $45.76 billion as the pandemic continued to hurt fuel demand. Revenue then rebounded 37.3% in the fiscal year ended April 25, 2022, to $62.81 billion. In the fiscal year ended April 25, 2023, revenue rose a further 14.4%, to $71.86 billion.
As a result of the earlier revenue increases between 2016 and 2019, earnings climbed 60.2% from $1.19 billion, or $1.04 a share, to $1.90 billion, or $1.63. (All per-share figures adjusted for a 2-for-1 split in September 2019.) Earnings then rose 15.8% in fiscal 2020, to $2.20 billion, or $1.97 a share. That rise came despite the lower revenue; it reflects sharply higher profit margins on fuel due to falling crude oil prices. In fiscal 2021, earnings rose 22.6%, to $2.72 billion, or $2.45 a share. Earnings then increased just 2.2% in fiscal 2022 to $2.77 billion, or $2.60 a share. The company’s costs rose and its fuel profit margins were hurt by rising crude prices. In fiscal 2023, earnings climbed a further 13.8%, to $3.15 billion, or $3.12 a share.
In its fiscal fourth quarter ended April 28, 2024, revenue rose by 8.2%, to $17.59 billion from $16.26 billion a year earlier (all figures except share price in U.S. dollars). The increase came mostly from acquisitions, higher revenues in its wholesale fuel business, as well as the contribution from growth in the number of stores. That was partly offset by the impact of one less week in the fourth quarter of fiscal 2024 compared with the fourth quarter of fiscal 2023, a lower average road transportation fuel selling price, softness in traffic as low-income consumers were impacted by challenging economic conditions, as well as lower aviation fuel volumes sold as a result of a change in business model.
Excluding one-time items, earnings fell 34.0%, to $461.0 million, or $0.48 a share, from $698.0 million, or $0.71. This decrease was primarily driven by lower road transportation fuel profit margins in the U.S., plus the impact of one less week in the fourth quarter of fiscal 2024 compared with the fourth quarter of fiscal 2023.
Couche-Tard continues to aggressively repurchase its shares. In fiscal 2024, it bought back 26.6 million shares for $1.4 billion.
Meanwhile, investors are also benefiting from a 25.0% rise in their quarterly dividend, to $0.175 (Canadian) a share from $0.14. That increase started in December 2023. The shares now yield 0.9%.
The company continues to roll out its loyalty program. That encourages customers to visit more often and spend more per visit.
The program, Inner Circle, gives members discounts on fuel ($0.03 per gallon) and merchandise. It upgrades to a premium membership, which includes more exclusive deals as well as early notice of new products once the customer spends $500 at Circle K stores (and a gasoline discount of $0.05 per gallon).
Couche-Tard’s launched its loyalty program in June 2023—and now has over 6.3 million fully enrolled U.S.members.
Meanwhile, to boost its prospects, Couche-Tard keeps opening electric vehicle (EV) fast chargers. Its network now consists of more than 2,400 charging points, including those in Europe and including 50 charge points for heavy trucks in Sweden. The company reports that it’s seeing a significant increase in overall charging actions on its Circle K-branded chargers driven by network expansion, improved payment offers and station upgrades, making them easier for its EV customers. In North America, it remains committed to deploying 200 chargers at 200 sites, and its footprint in Canada now covers Quebec, Ontario, B.C. and Alberta and 11states in the U.S.
The firm also added to its chain of car washes with the acquisition of True Blue Car Wash LLC, which has 65 locations in high-traffic areas of Arizona, Illinois, Indiana and Texas. Couche-Tard completed the purchase in February 2023, and the purchase price was about $300 million.
True Blue’s car washes were a good fit with Couche-Tard’s own network of more than 2,500 car-wash locations, and True Blue had a strong pipeline of future new sites planned and under development. The chain saw strong growth in recent years and washed more than 10 million cars in 2022.
Couche-Tard says that more than 85% of True Blue’s car wash locations were within three miles of one of its own Circle K locations. That means the acquisition provided a strong geographic overlap to support traffic between True Blue sites and Circle K convenience stores.
Growth by acquisition adds risk, especially with a string of deals as big as these. However, the company has a long track record of successfully integrating those businesses.
The company has announced a new five-year growth plan. It now aims to increase its annual earnings before interest, taxes, depreciation, and amortization (EBITDA) from $5.8 billion U.S. in fiscal 2023 (fiscal years end April 30) to $10 billion U.S. in fiscal 2028.
A big part of that growth will come from acquisitions, including its recently completed deal to buy most of the European retail assets of French energy giant Total Energies SE (see above).
Cost cutting will also help Couche-Tard reach its 2028 EBITDA target as its copes with rising employee wages and other costs.
For all of fiscal 2024, Couche-Tard will probably earn $3.02 U.S. a share, and the stock trades at a reasonable 19.6 times that forecast. The $0.56 (Canadian) dividend yields 0.9%.
We hope you benefited from this analysis of Alimentation Couche-Tard. The company is just one of the top-performing stock picks of our Power Growth Investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
Is ATD a good stock to buy? Let’s summarize the key points to help you decide. Alimentation Couche-Tard (ATD) has demonstrated impressive growth and resilience over the years, making it a potentially attractive stock for investors. The company operates over 14,600 convenience stores across North America and Europe, and has a strong track record of successful acquisitions and integration.
Key factors supporting ATD’s potential include:
Consistent revenue growth, with a 14.4% increase to $71.86 billion in fiscal year 2023
Steady earnings growth, reaching $3.12 per share in fiscal 2023
Strategic acquisitions, including recent expansion in Europe through the TotalEnergies deal
Diversification into electric vehicle charging and car wash services
Strong loyalty program with nearly 5 million U.S. members
Aggressive share repurchase program and increasing dividends
Ambitious five-year growth plan targeting $10 billion in EBITDA by fiscal 2028
However, investors should consider potential risks such as integration challenges from acquisitions and market fluctuations affecting fuel sales. The stock currently trades at a reasonable 18.8 times forecast earnings, with a dividend yield of 0.9%. While past performance doesn’t guarantee future results, ATD’s solid fundamentals and growth strategy make it a stock worth considering for investors seeking exposure to the convenience store and fuel retail sectors.
This post was originally published in April 2023 and is regularly updated.
Royal Bank of Canada is celebrated as a conservative, blue-chip stock offering a dependable dividend yield.
But there’s more. It has also returned our investors a massive 1,989.8% gain since we first recommended it in April 1995. That gain dramatically outpaced the 442.7% rise for the S&P/TSX Composite index.
Why buy now? Current uncertainty caused by rising interest rates and still-high inflation has prompted Canada’s big banks to increase their loan-loss provisions.
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Those provisions remain well below their 2020 pandemic peaks. Still, the impact on earnings impacts valuations and that only increases the current buying opportunity.
The stock trades at modest 13.4 times forecast earnings. That’s cheap for such a solid business.
ROYAL BANK OF CANADA (Toronto symbol RY; www.rbc.com)
has now completed its $13.5-billion purchase of the Canadian operations of U.K.-based HSBC Holdings plc (New York symbol HSBC).
HSBC operates 130 branches that mainly cater to businesses in industries that trade and bank internationally. It also provides banking and wealth management services to about 780,000 retail clients. In all, it had total assets of $134 billion.
Royal plans to convert most of those HSBC branches to its own banner. HSBC clients will also receive new accounts and credit cards.
In all, the bank now expects it will cost $1.5 billion to integrate the new operations. However, it expects to realize annual cost savings of $740 million by the end of the second year.
Due to the small size of the Canadian banking market, Royal prefers to expand internationally. For example, in 2015 it acquired Los Angeles-based City National Bank for $5.5 billion U.S. in cash and shares. City National lends to wealthy individuals as well as businesses in the entertainment, technology and health-care industries.
That acquisition is a big reason why overall revenue rose 20.5% for Royal, from $40.67 billion in 2017 to $48.99 billion in 2022 (fiscal years end October 31). In fiscal 2023, revenue then rose a further 14.6%, to $56.13 billion.
Overall earnings gained 12.5%, from $11.43 billion in 2017 to $12.86 billion in 2019; due to fewer shares outstanding, earnings per share rose at a faster rate of 15.7%, from $7.56 to $8.75.
Royal set aside $4.35 billion to cover potential loan defaults in fiscal 2020 due to the uncertainty over COVID-19; that was up 133.4% from $1.86 billion in 2019. As a result of the spike, earnings in 2020 fell 11.1% to $11.44 billion, while earnings per share declined 10.6% to $7.82.
However, Royal was reversing those provisions as the economy re-opened. As a result, earnings in 2021 jumped 40.3%, to $16.04 billion; per-share earnings rose 41.4% to $11.06. In fiscal 2022, earnings then dropped 1.5%, to $15.81 billion, or $11.06 a share (on fewer shares outstanding). The reduced profit reflected lower results in Capital Markets and Insurance, partially offset by higher earnings in Personal & Commercial Banking, Wealth Management, and Investor & Treasury Services. The current year also reflects lower releases of provisions on performing loans than a year ago. In fiscal 2023, earnings then dropped a further 6.0%, to $14.87 billion, or $10.50 a share. That decline was mostly due to a higher provision for credit losses.
Value Stocks: Earnings beat the consensus estimate despite higher loan-loss provisions for Royal Bank of Canada
In its fiscal 2024 second quarter, ended April 30, 2024, Royal’s revenue rose 13.7%, to $14.15 billion from $12.45 billion a year earlier. That topped the consensus forecast of $13.53 billion.
The newly acquired HSBC operations contributed $245 million to that gain. The bank also benefited from higher loan volumes and deposits.
The HSBC purchase also increased Royal’s loan-loss provisions by 53.3%, to $920 million from $600 million a year earlier.
Despite the higher provisions, earnings before unusual items gained 11.0% in the latest quarter, to $4.13 billion from $3.72 billion. Due to more shares outstanding, per-share earnings rose at a slower rate of 9.0%, to $2.92 from $2.68. That also beat the consensus estimate of $2.75.
Earnings from Royal’s retail banking division (48% of the total) rose 7.1% as higher interest income on its loans offset rising loan-loss provisions. Earnings at the capital markets business (30%) also rose 31.2% on higher trading volumes and underwriting fee income. As well, the wealth management division (18%) reported 7.0% better earnings due to higher assets under management. Earnings at Royal’s insurance division (4%) also rose 4.1%, as better returns from its investment portfolio offset higher claims.
For all of fiscal 2024, Royal will probably earn $11.34 a share, and the stock trades at an attractive 13.4 times that forecast.
Moreover, with the August 2024 payment, Royal will raise your quarterly dividend by 2.9%. Investors will then receive $1.42 a share instead of $1.38. The new annual rate of $5.68 yields 3.8%. The bank also announced a new plan to buy back about 2% of its outstanding common shares over the next year.
We hope you benefited from this analysis of Royal Bank of Canada. The bank is just one of the top-performing stock picks of our Successful Investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
Subscribe to The Successful Investor so you can access many more market-leading Buy recommendations for maximum returns.
This post was originally published in April 2023 and is regularly updated.
Amerigo Resources is a shining exception to almost all other penny stocks thanks to its stellar and lasting returns.
The firm has returned a stellar 205.2% gain to investors over the last 4 years. Compare that to the benchmark S&P Global Natural Resource index, up a mere 50.7% over the same time. (The S&P itself gained 73.9% over the last four years.)
Even more unheard of is the copper producer’s high and sustainable 6.8% dividend yield. We expect this well-resourced junior miner to add significantly to investor gains as the global economy rebounds from inflationary pressures and sluggish growth.
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AMERIGO RESOURCES LTD. (Symbol ARG on Toronto) processes copper and molybdenum from the waste rock of the El Teniente mine in Chile. That site is the world’s largest copper operation. Amerigo also has other deals to process material at the nearby Colihues and Cauquenes tailings ponds.
Amerigo has continued to buy back a lot of its shares. Share buybacks reduce the number of shares outstanding. That boosts earnings per share since profit is divided among fewer shares. The improved per-share ratio makes the stock more attractive to investors.
This further spurs the share price.
The company completed its 2022 share-repurchase plan well ahead of schedule.
Under that plan, Amerigo was authorized by the Toronto exchange to purchase up to 10.75 million common shares (representing 6.14% of the common shares outstanding) over a period of 12 months starting December 2, 2021, and ending no later than December 1, 2022.
Amerigo bought back all 10.75 million shares at an average cost of $1.62.
Meantime, Amerigo returned $14.6 million to shareholders in 2023 in dividend payments, as well as $2.6 million through the purchase of 2.3 million common shares. Amerigo’s shares yield a high 6.8%.
Meanwhile, due to its strong cash flow, the company has declared its first Performance Dividend of $0.04 a share. The dividend is payable on August 6, 2024, to shareholders of record as of July 16, 2024. In the latest quarter, the company’s cash reserves reached targeted levels, allowing more than the equivalent of an additional quarterly dividend to be paid to shareholders.
The $0.04-a-share dividend is in addition to Amerigo’s regular $0.03 quarterly dividend.
Penny Stocks: Long-term copper demand is a major driver going forward for Amerigo Resources
Amerigo currently gets 94% of its revenue from processing copper. The remaining 6% comes from its output of molybdenum, which is used in steelmaking.
Amerigo reported lower copper production in the latest quarter. The company’s copper production fell 3.1%. Specifically, output for the three months ended March 31, 2024, dropped to 16.0 million pounds (at a production cost of $1.96 per pound) from 16.52 million pounds (at a cost of $1.91) a year earlier. Copper production in the latest quarter was down due to lower ore grades.
After dropping to as low as $2.17 U.S. per pound in mid-March 2020, copper rose steadily to a record price of $5.02 on March 6, 2022. Fears of supply chain disruptions and historically low stockpiles amid rising copper demand drove prices higher.
However, copper prices then dropped—before climbing to today’s price of $4.36. That’s despite concerns that high interest rates will continue to slow global economies. As well, investors worry about the pace of China’s economic recovery.
Longer term, the outlook for copper looks positive. From a supply standpoint, due to a lack of new mines, long-term copper shortages could result. And as economies recover, it will push up demand—and that includes demand from segments such as electric vehicles (EVs) and green-energy related operations.
Copper market fundamentals suggest continued strength going forward. The copper supply/demand imbalance also presents an investment opportunity for those interested in copper-mining stocks.
All these factors bode well for the company and its share price going forward.
Recommendation in Power Growth Investor: Amerigo Resources Ltd. is a buy for aggressive investors.
We hope you benefited from this analysis of Amerigo Resources Ltd. The company is just one of the top-performing stock picks of our Power Growth Investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
This post was originally published in April 2023 and is regularly updated.
Canadian Pacific’s merger with Kansas City Southern Railway is now complete, the company will now be called Canadian Pacific Kansas City. The merger has boosted its already strong share price.
This deal is a game-changer for future earnings and share price growth. The firm is an essential part of North America’s transportation sector. Its sound revenue and earnings before, during and after pandemic lockdowns makes it a top buy.
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It’s returned 5,584.8% to our subscribers since we first recommended it as a buy in January 1995. Key investments have helped lift the stock 80.6% in the last five years, alone, and we expect those gains to continue.
CANADIAN PACIFIC KANSAS CITY LTD. (Toronto symbol CPKC) is one of our top buys.
The company has now completed its acquisition of U.S.-based railway Kansas City Southern (KCS) and formally changed its name from CP Railway.
CP had originally completed the KCS acquisition in December 2021. It deposited the KCS shares into an independent voting trust, which operated that business while the regulator studied the purchase.
The company paid $31 billion U.S. in cash and shares for KCS. CP investors own 72% of the merged company, with KCS shareholders holding the remaining 28%.
CP began merging the two businesses on April 14, 2023. The new company’s shares trade on both the Toronto and New York exchanges.
CPKC ships freight over a 32,190-kilometre rail network. That line runs mainly between Montreal and Vancouver, with links to hubs in the U.S. Midwest and Northeast. With the addition of KSC, the new company also connects with important hubs and ports on the U.S. Gulf Coast and in Mexico.
Investors can expect cost savings from the merger to add $1 billion U.S. to the company’s annual earnings before interest, taxes, depreciation and amortization (EBITDA) by the end of the third year. In 2022, CP’s EBITDA (excluding KCS) was $5.23 billion (Canadian).
Note that while CP mostly owns the land under its tracks in Canada and the U.S., it operates its lines in Mexico under a government concession that expires in 2047. As a result, it’s vulnerable to changes in Mexico’s transportation policies.
The government of Mexico now wants to expand the availability of passenger rail service within that country, mainly by giving passenger trains priority over cargo on certain rail lines.
However, CP does not expect this demand will have a negative impact on its concession. It has also agreed to work with the government on a plan to let passenger trains run on a 200-kilometre corridor running northwest from Mexico City. What’s more, the company has a long history of sharing its lines in Canada and the U.S. with passenger traffic. Those factors should minimize any disruptions to its operations.
Blue Chip Stocks: CPKC’s earnings grow along with a focus on efficiency
CP’s revenue rose 18.9%, from $6.55 billion in 2017 to $7.79 billion in 2019. However, the COVID-19 pandemic hurt shipments of coal, crude oil, metals and automotive products. As a result, revenue fell 1.1% to $7.71 billion in 2020. Revenue then improved 3.7% to $8.00 billion in 2021 as the economy re-opened. In 2022, revenue climbed a further 10.2%, to $8.81 billion. Revenue then jumped 42.4% in 2023 to $12.56 billion, largely due to the acquisition of KCS.
The company’s strong focus on efficiency helped its earnings before unusual items jump 110.8%, from $1.67 billion in 2017 to $3.52 billion in 2022. Due to more shares outstanding, earnings per share during those six years rose at a slower rate of 65.4%, from $2.28 to $3.78. (Note—all per share amounts are adjusted for a 5-for-1 stock split in April 2021.) In 2023, earnings rose 11.7%, to $3.93 billion, or $4.22 a share.
As a result of the KCS merger, the new company’s revenue in the three months ended March 31, 2024, rose 55.3%, to $3.52 billion from $2.27 billion a year earlier. However, that missed the $3.54 billion consensus forecast.
On a comparable basis, revenue in the quarter improved 1.9%. That increase was mainly due to higher shipments of potash, metals, U.S. grain and automotive goods.
If you exclude costs related to the KCS purchase and other unusual items, earnings in the quarter rose 3.3%, to $0.93 a share (or a total of $866 million) from $0.90 a share (or $840 million). The latest earnings also fell short of the $0.94 consensus estimate.
The company’s operating ratio in the quarter worsened to 64.0% from 63.5% a year earlier. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower that ratio is, the better.) That’s mainly due to higher employee wages and costs associated with using other railways’ freight cars and equipment.
CPKC’s earnings for 2024 are now forecast at $4.34 a share. The stock trades at a reasonable 25.8 times that estimate. The company also expects its earnings per share will rise by at least 10% annually between 2024 and 2028 as it realizes more benefits from the merger. The $0.76 dividend yields 0.7%.
Meanwhile, the union representing the company’s locomotive engineers, conductors and yard workers has been in a position to go on strike since it voted on May 22, 2024. However, while that would hurt CPKC’s short-term results, its longer-term prospects remain intact. The possibility of a protracted job action, if it happens, also seems low given the pressure shippers of goods and commodities would likely place on the federal government to intervene.
We hope you benefited from this analysis of CPKC Rail. The company is just one of the top-performing stock picks of our Successful Investor newsletter.
Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.
This article was originally published in 2023 and is regularly updated.
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Although you may be able to access some of our websites without being required to register or provide personal information, certain websites and sections of our websites may require registration. In addition, if you choose to contact us to ask a question, we will collect your personal information so that we can respond to your question.
To make the visitor’s experience on our website easier, we may use per-session “cookies” (session identifiers) to track the state of the visitor session. This “cookie” is destroyed when your session with our website is over.
Cookies are alphanumeric identifiers that we transfer to your computer's hard drive through your web browser to enable our systems to recognize your browser and to provide features like "Remember Me" for our paying subscribers. Cookies are also used during the ordering process to help ensure your order is handled correctly. We do not extract any information about individual users or their computers as a part of this process.
The "Help" portion of the toolbar on most browsers will tell you how to prevent your browser from accepting new cookies, how to have the browser notify you when you receive a new cookie, or how to disable cookies altogether. However, cookies allow you to take full advantage of some of TSI Network's most useful features, and may be required to access certain areas of our website.
Internet Protocol (or IP) addresses are collected for all visitors to this site. This information is used for the purposes of traffic analysis.
Does TSI Network Use the Information It Receives?
"Contact Us" and Comment Features: TSI Network encourages visitors to its websites to contact us with questions and comments. Email addresses and other information of persons using these features may be collected in order to facilitate our responses to those inquiries.
Purchases of Merchandise: TSI Network websites may offer individuals the opportunity to purchase branded or other merchandise online. In connection with those purchases, customers may be asked to submit personal information, such as shipping addresses and credit card information, which is required to complete the transaction. TSI Network may also offer a Membership program, through which purchasers of its products may receive discounts on their online purchases. Membership registration may involve the submission of personal information to TSI Network and assignment of a user ID and password.
Agents: We employ other companies and individuals to perform functions on our behalf. Examples include fulfilling orders, delivering packages, sending postal mail and email, removing repetitive information from customer lists, analyzing data, providing marketing assistance, processing credit card payments and providing customer service. They have access to personal information needed to perform their functions, but may not use it for other purposes.
Promotional Offers: We may make our postal mailing list available to organizations offering products or services that might interest you. If you prefer NOT to receive these offers, please send an email with your name and address to service@tsinetwork.ca with "Do Not Rent Name" in the subject line. We do NOT make our email list available outside our organization.
Protection of TSI Network and Others: We release account and other personal information when we believe release is appropriate to comply with law; enforce the terms of the Legal notices that accompany this policy; or protect the rights, property or safety of TSI Network, our users or others. This includes exchanging information with other companies and organizations for fraud protection and credit risk reduction.
In addition to these limited disclosures of personal information, TSI Network may provide its affiliates or unaffiliated third parties with aggregate information about visitors to our sites. For example, we might disclose the median ages of visitors to our websites, or the numbers of visitors to our websites that come from different geographic areas. Such aggregate information will not include information of any individual visitors to our websites.
TSI Network may provide personal and other information to a purchaser or successor entity in connection with the sale of TSI Network, a subsidiary or line of business associated with TSI Network, or substantially all of the assets of TSI Network or one of its subsidiaries, affiliates or lines of business.
With Your Consent: Other than as set out above, you will receive notice when information about you might go to third parties, and you will have an opportunity to choose not to share the information.
Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
We may disclose personal information you have provided through our websites, for the above purposes, to persons or companies that we retain to carry out and other activities for which you have registered or in which you have otherwise asked to participate. In particular, we may for these purposes transfer information to any country (including the USA and other countries which may not offer the same level of data protection as Canada). We also will disclose personal information if required by law, including compliance with warrants, subpoenas or other legal processes.
TSI Network requires persons and companies to which it discloses personal information to restrict their use of such information to the purposes for which it has been provided by TSI Network, to adequately protect the information, and not to disclose that information to others. TSI Network cannot be responsible, however, for any damages caused by the failure of unaffiliated third parties to honour their privacy obligations to TSI Network. Similarly, TSI Network is not responsible for the privacy policies and practices of other websites that are linked to our websites.
COMMENTS: TERMS OF USE
We’re always happy to receive feedback, comments and ideas from TSI Network visitors, and we encourage you to add your perspective to any issue by leaving your comments on the site.
To make sure users get the most out of the site’s comments function, we’ve provided a few guidelines:
Do not post threatening, harassing, defamatory, or libelous material.
Do not intentionally make false or misleading statements.
Do not offer to sell or buy any product or service.
Do not post material that infringes copyright.
Do not post information that you know to be confidential or sensitive or otherwise in breach of the law.
TSI Network will not accept responsibility for information posted in the comments.
Please note that we reserve the right to delete or edit all comments. As well, we may close posts to further comments at our discretion. If a user repeatedly abuses our comment policy, we may also revoke that user’s access to our comments section.
By commenting on TSI Network, you agree that you retain all ownership rights in what you post on the site, and that you will relieve us from any and all liability that may result from those postings.
Special Note for Parents
TSI Network does not sell products for purchase by children. If you are under 18, you may use TSI Network's site only with involvement of a parent or guardian
How do we protect your personal information?
TSI Network does everything possible to prevent unauthorized intrusion to its websites and the alteration, acquisition or misuse of personal information by unauthorized persons. Notably passwords submitted by users of our websites are encrypted using encryption mechanisms. However, TSI Network cautions visitors to its websites that no network, including the Internet, is entirely secure. Accordingly, we cannot be responsible for loss, corruption or unauthorized acquisition of personal information provided to our websites, or for any damages resulting from such loss, corruption or unauthorized acquisition.
How do we maintain the integrity of your personal information?
TSI Network has procedures in place to keep your personal information accurate, complete and current for the purposes for which it is collected and used. You may review the information that you have provided to us and where appropriate you may request that it be corrected. If you wish to review your personal information please send a request to: service@tsinetwork.ca.
How do I withdraw my consent to use Personal Information? Access, Correction, Inquiries and Complaints
If you wish to request access to, or correction of, your personal information in our custody or control, or find out how we've used or disclosed that information, please make your request in writing to us. We may need to verify your identity before searching for or providing you with personal information. In some circumstances, we may not be able to provide access to your personal information, for example if it contains the personal information of other persons, if it constitutes confidential commercial information, or if it is protected by solicitor-client privilege. If we deny your request for access to, or refuse a request to correct, your personal information, we will advise you of the reasons for this refusal.
If you do not want to receive promotional offers, please notify TSI Network by sending an email to service@tsinetwork.ca.
How can you ask questions about our Privacy Policy and access your personal information?
The provision of information by you is entirely voluntary and you have the right not to provide information. Subject to applicable law, you may have the right to receive certain information as to whether or not personal information relating to you is held by TSI Network and to obtain a copy of such information that is sought. You may also have the right to require information, where appropriate, to be erased, blocked or made anonymous or to have data updated or corrected. If you do not wish TSI Network to hold information about you or if you wish to have access to information, modify information, or object to any processing of information or if you have questions please contact us.
What Choices Do I Have?
As discussed, you can always choose not to provide information even though it might be needed to make a purchase or to take advantage of TSI Network features.
You can add or update certain information as explained in the section "How Can I Change My Information?"
If you do not want to receive email or other mail from us, please notify TSI Network by sending an email to service@tsinetwork.ca.
The "Help" portion of the toolbar on most browsers will tell you how to prevent your browser from accepting new cookies, how to have the browser notify you when you receive a new cookie, or how to disable cookies altogether. However, you will not be able to use important features of TSI Network sites if you do not use cookies.
Changes to this Policy
This Policy is the sole authorized statement of TSI Network's practices with respect to the collection of personal information through TSI Network's websites and the subsequent use and disclosure of such information. Any summaries of this Policy generated by third party software or otherwise (for example, in connection with the "Platform for Privacy Preferences" or "P3P") shall have no legal effect, are in no way binding upon TSI Network, shall not be relied upon in substitute for this Policy, and neither supersede nor modify this Policy.
TSI Network may revise this Policy from time to time.
Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
Information presented on this web site or contained in our publications is not an offer, nor a solicitation, to buy or sell any securities referred to on the web site or in the publications. The material is general information intended for recipients who understand the risks associated with an investment in any securities referred to in the publications or on this web site. The Successful Investor has made no determination regarding whether an investment, course of action, or associated risks are suitable for the recipient.
