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CANADIAN PACIFIC RAILWAY $91.88 (Toronto symbol CP; Shares outstanding: 171.7 million; Market cap: $15.8 billion; TSINetwork Rating: Average; Dividend yield: 1.5%; www.cpr.ca), transports freight between Montreal and Vancouver and connects with hubs in the U.S. midwest and northeast.

In the quarter ended September 30, 2012, CP’s revenue rose 8.2%, to $1.45 billion from $1.34 billion a year earlier. Earnings rose 19.8%, to $224 million, or $1.30 a share, from $187 million, or $1.10.

CP’s operating ratio improved to 74.1% from 75.8%, a year ago. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.) The improvement came from higher shipments, lower fuel prices and better operating performance.

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IBM $194.53 (New York symbol IBM; Shares outstanding: 1.1 billion; Market cap: $214.0 billion; TSINetwork Rating: Above Average; Dividend yield: 1.8%) is down from $210 a share in mid-October after it reported revenue of $24.7 billion in the quarter ended September 30, 2012. That’s down 5.4% from $26.2 billion a year earlier and short of the consensus estimate of $25.4 billion.

The slow global economy is hurting demand for IBM’s mainframe computers, services and software. That’s why its revenue fell.

However, the company’s ongoing cost cuts and productivity improvements pushed up its earnings before one-time items by 10.4%, to $3.62 a share from $3.28. That beat the consensus estimate of $3.61.

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ENERPLUS CORP. $16.05 (Toronto symbol ERF; Shares outstanding: 197.6 million; Market cap: $3.2 billion; TSINetwork Rating: Extra Risk; Dividend yield: 6.7%) produces an average of 82,108 barrels of oil equivalent per day (weighted 51% to natural gas and 49% to oil). Its properties are mainly in Alberta, Saskatchewan, B.C., North Dakota and Montana, as well as the Marcellus Shale, which passes through Pennsylvania, New York, Ohio and West Virginia.

In the three months ended June 30, 2012, Enerplus’s cash flow per share was unchanged at $0.74 from a year earlier.

In June 2012, the company cut its monthly dividend by 50%. It now yields 6.7%.

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ISHARES MSCI JAPAN INDEX FUND $9.06 (American Exchange symbol EWJ; buy or sell through brokers; us.ishares.com) is an exchange traded fund that tries to match the return of the Morgan Stanley Capital International (MSCI) Japan index.

The ETF’s top holdings include Toyota, 5.2%; Mitsubishi UFJ Financial, 2.8%; Honda Motor, 2.5%; Sumitomo Mitsui Financial, 2.0%; Takeda Pharmaceutical, 1.8%; Canon, 1.8%; Mizuho Financial Group, 1.8%; Fanuc Corp., 1.5%; Softbank Corp., 1.4%; and Japan Tobacco Inc., 1.3%.

The fund’s industry breakdown is as follows: Industrials, 20.6%; Consumer Discretionary, 19.1%; Financials, 18.5%; Information Technology, 11.1%; Consumer Staples, 7.2%; Health Care, 7.2%; Materials, 6.3%; Telecommunication Services, 4.5%; Utilities, 2.7%; and Energy, 1.6%.

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ENCANA CORP. $21 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $15.5 billion; Price-to-sales ratio: 2.0; Dividend yield: 3.7%; TSINetwork Rating: Average; www.encana.com) owns the Deep Panuke offshore natural gas field south of Nova Scotia.

The project’s cost has risen to $960 million from an earlier estimate of $750 million because Encana had problems building the drilling platform (all amounts except share price and market cap in U.S. dollars). To put that in context, the company’s cash flow was $794 million, or $1.08 a share, in the quarter ended June 30, 2012.

Even with these delays, Encana still aims to begin producing gas at Deep Panuke by the end of 2012. At full capacity, this new project will increase the company’s daily gas production by 9%.

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Many investors start their search for winning stocks by looking at a company’s income statement and balance sheet. But it helps to remember that earnings are adjusted and that some items in a corporate report are more useful to investors than others. A company’s earnings are different from an employee’s salary. Earnings are indefinite and subject to revision, even years later. Companies have to estimate many costs, and make yearly write-offs against earnings, according to arbitrary rules....

BAXTER INTERNATIONAL INC. (New York symbol BAX; www.baxter.com) makes medical products, such as intravenous pumps and kidney dialysis equipment. It also makes vaccines and drugs. Half of its sales come from single-use products that need to be continually reordered. Demand for the company’s products continues to improve, particularly as an aging population needs more medical devices and drugs. Baxter’s sales rose 23.4%, from $11.3 billion in 2007 to $13.9 billion in 2011....

The Merriam-Webster dictionary defines jargon as the “technical terminology” of a special activity or group. But it also defines it as “confused unintelligible language.” Every industry and group has its own special jargon. This specialized language always has the same purpose. It simplifies communications within the industry, and helps make insiders feel they are part of a tightly knit community. It also helps the group pursue its goals. It shapes concepts that will establish lines of thought and discussions that match the industry’s view of the world. But it can be confusing for those who are not insiders in the group....

ATCO LTD. $75 (www.atco.com) has won a contract to design and build a noise-control barrier around a natural-gas-fired power plant in Texas. This barrier will shield nearby residential neighbourhoods from low-frequency sounds that rattle doors and windows....

CAE INC. $10 (Toronto symbol CAE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 258.7 million; Market cap: $2.6 billion; Price-to-sales ratio: 1.4; Dividend yield: 2.0%; TSINetwork Rating: Average; www.cae.com) is the world’s leading maker of flight simulators for commercial airlines, with 70% of the market. It also makes simulators for military clients. The company began training pilots for its customers in 2001; it now has over 100 flight schools in 30 countries.

CAE gets 50% of its revenue from military clients. That cuts its exposure to cyclical commercial airlines, which supply 45% of its revenue.

New markets have big potential

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TIM HORTONS INC. $50 (Toronto symbol THI; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 154.9 million; Market cap: $7.7 billion; Price-to-sales ratio: 2.5; Dividend yield: 1.7%; TSINetwork Rating: Average; www.timhortons.com) is the first fast-food company in Canada that lets customers pay for their purchases using their smartphones. After installing the necessary software, users can pay for their purchases by swiping their phone in front of a special scanner. This should speed up service and encourage repeat visits.

The company has installed these scanners in 2,300 of its 3,300 coffee-and-donut stores in Canada. Tim Hortons plans to bring this technology to an additional 700 outlets by December 2012.

Tim Hortons is a buy.

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CANADIAN NATIONAL RAILWAY CO. $86 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 431.5 million; Market cap: $37.1 billion; Price-to-sales ratio: 3.7; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.cn.ca) will repurchase up to 5.8 million of its shares from a private seller at a discount to the market price....

SHAWCOR LTD. $44 (Toronto symbol SCL.A; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 70.2 million; Market cap: $3.1 billion; Price-to-sales ratio: 2.5; Dividend yield: 0.9%; TSINetwork Rating: Average; www.shawcor.com) has acquired the 60% of Fineglade Ltd. that it did not already own. Fineglade owns 96% of Socotherm S.p.A., an Italian company that provides pipeline-coating services in Europe and Asia.

ShawCor paid $135 million, which is equal to 2.4 times its 2011 earnings of $56.1 million, or $0.78 a share.

The company is now conducting a strategic review of its operations. That could mean that ShawCor will eventually be sold. It hasn’t said how long this process will take.

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MAPLE LEAF FOODS INC. $11 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 140.0 million; Market cap: $1.5 billion; Price-to-sales ratio: 0.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.mapleleaf.ca) is acquiring Puratone Corporation, a private company that raises over 500,000 hogs a year at 50 barns in Manitoba.

The takeover will give Maple Leaf control of 30% of the hogs used by its processing facility in Brandon,
Manitoba.The company will pay $42 million for Puratone when the deal closes in the next few weeks. To put that in context, Maple Leaf earned $30.2 million, or $0.21 a share, in the three months ended September 30, 2012. That’s down 24.5% from $39.9 million, or $0.28 a share, a year earlier.

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SUNCOR ENERGY INC. $34 (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.5 billion; Market cap: $51.0 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.5%; TSINetwork Rating: Average; www.suncor.com) will spend $6.65 billion to upgrade its operations in 2012, down 11.3% from its earlier forecast of $7.5 billion. That’s mainly due to lowerthan- expected costs to expand its Firebag oil sands project in Alberta. The new addition should begin operating by the end of 2012—three months ahead of schedule.

The recent drop in oil prices has also prompted Suncor to slow the development of three other big oil sands projects. However, lower oil prices are boosting profits at Suncor’s refineries. As a result, cash flow per share rose 2.9% in the three months ended September 30, 2012, to $1.78 from $1.73 a year earlier.

Suncor is a buy.

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AGRIUM INC. $95 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 149.0 million; Market cap: $14.2 billion; Price-to-sales ratio: 0.9; Dividend yield: 2.1%; TSINetwork Rating: Average; www.agrium.com) gets 60% of its sales from stores that sell fertilizers to farmers. It also makes fertilizers from natural gas, and other fertilizers such as potash and phosphate.

In the three months ended September 30, 2012, earnings fell 26.6%, to $215 million, or $1.34 a share, from $293 million, or $1.85 a share a year earlier (all amounts except share price and market cap in U.S. dollars). Sales fell 5.7%, to $3.0 billion from $3.1 billion. Weak demand for potash offset strong sales of other fertilizers.

Partly due to pressure from activist investor Jana Partners, which owns about 4% of Agrium’s shares, the company recently doubled its dividend to $2.00 a share from $1.00. The stock now yields 2.1%. It also spent $900 million (Cdn.) on share buybacks.

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POTASH CORP. OF SASKATCHEWAN $40 (Toronto symbol POT; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 861.6 million; Market cap: $34.5 billion; Price-to-sales ratio: 4.1; Dividend yield: 2.1%; TSINetwork Rating: Average; www.potashcorp.com) is the world’s largest fertilizer producer. It has six potash mines in Saskatchewan and one in New Brunswick.

The company has faced delays in securing new supply contracts with buyers in China. That has lowered its potash shipments. As well, the Indian government has cut fertilizer subsidies.

As a result, Potash Corp.’s earnings fell 21.9% in the three months ended September 30, 2012, to $645 million or $0.74 a share (all amounts except share price and market cap in U.S. dollars). A year earlier, it earned $826 million, or $0.94 a share. Sales fell 7.7%, to $2.1 billion from $2.3 billion.

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PENGROWTH ENERGY CORP. $5.59 (Toronto symbol PGF; Aggressive Growth Portfolio, Resources sector; Shares outstanding: 507.1 million; Market cap: $2.8 billion; Price-to-sales ratio: 1.8; Dividend yield: 8.6%; TSINetwork Rating: Average; www.pengrowth.com) has suffered from low natural gas prices, same as Encana. That’s why in May 2012 it bought NAL Energy Corp., which gets roughly half of its production from higher-priced oil. Thanks to this purchase, Pengrowth’s daily production rose 26.4% in the three months ended September 30, 2012, to a record 94,284 barrels of oil equivalent from 74,568 a year ago. Natural gas accounted for 60% of its production, down from 63% a year earlier.

Depressed natural gas prices pushed down Pengrowth’s cash flow by 6.2% in the quarter, to $141.1 million from $150.4 million a year earlier. Cash flow per share fell 39.1%, to $0.28 from $0.46, on more shares outstanding. Even so, the extra production from NAL should let Pengrowth keep paying monthly dividends of $0.04 a share (for an 8.6% annualized yield).

Pengrowth is still a buy.

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TRANSCANADA CORP. $45 (Toronto symbol TRP; Conservative Growth Portfolio, Utilities sector; Shares outstanding: 705.0 million; Market cap: $31.7 billion; Price-to-sales ratio: 3.6; Dividend yield: 3.9%; TSINetwork Rating: Above Average; www.transcanada.com) has won contracts to build and operate two pipelines that will supply natural gas to government-owned power plants in Mexico.

These lines will cost $1.4 billion U.S., and should begin operating in 2016. TransCanada has 25-year contracts with Mexico’s federal power company, which cuts the risk of these investments. These deals should help the company win even more business as Mexico continues to convert its power plants from coal to gas.

TransCanada is a buy.

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TORSTAR CORP. $8.01 (Toronto symbol TS.B; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 79.7 million; Market cap: $638.4 million; Price-to-sales ratio: 0.4; Dividend yield: 6.6%; TSINetwork Rating: Above Average; www.torstar.com) publishes The Toronto Star, Canada’s largest daily newspaper by circulation. It also publishes three other daily papers and over 110 weeklies, mainly in Southern Ontario. The company also owns a hidden asset in Harlequin Enterprises Ltd., the world’s leading romance novel publisher.

Ad revenue from Torstar’s newspapers is shrinking faster than we thought. As well, revenue from its web sites has so far failed to make up the difference. Strong competition and unfavourable foreign exchange rates are also hurting profits at Harlequin. As a result, Torstar’s earnings fell 44.0% in the three months ended September 30, 2012, to $14.1 million, or $0.18 a share, from $25.2 million, or $0.32 a share, a year earlier.

The company continues to cut costs by laying off workers and selling surplus real estate. These moves should save it $5.2 million in the fourth quarter of 2012 and an additional $9.5 million in 2013. If you exclude severance costs and other one-time items, Torstar’s earnings per share would have fallen 21.6%, to $0.29 from $0.37.

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TRANSCONTINENTAL INC. $10 (Toronto symbol TCL.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 80.6 million; Market cap: $806.0 million; Price-to-sales ratio: 0.4; Dividend yield: 5.8%; TSINetwork Rating: Average; www.tctranscontinental.com) gets two-thirds of its revenue from its commercial printing business, which is the largest in Canada and the fourth-biggest in North America. The remaining third comes from publishing newspapers and magazines. Transcontinental is also continuing to expand its online operations: it now has over 3,500 websites that attract 18.7 million unique visitors a month.

The company’s exposure to the highly cyclical advertising business adds to its risk. However, over half of its printing revenue comes from long-term contracts that range from three to 18 years.

For example, Transcontinental currently prints a wide variety of magazines and advertising materials for Rogers Communications Inc. (Toronto symbol RCI.B). Rogers recently agreed to extend this contract to 2019. That will add a total of $250 million to Transcontinental’s revenue.

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THOMSON REUTERS CORP. $28 (Toronto symbol TRI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 825.9 million; Market cap: $23.1 billion; Price-to-sales ratio: 1.6; Dividend yield: 4.6%; TSINetwork Rating: Above Average; www.thomsonreuters.com) gets 56% of its revenue and 45% of its earnings by selling news and information to professionals in the banking industry. It also sells specialized information products to clients in the legal, accounting and scientific-research fields.

Slow economic growth and tighter regulations are prompting banks and brokerage firms to cut their spending on information products. Thomson Reuters is also spending more to improve the performance of, and add new features to, its Eikon desktop computer terminals, which deliver news and financial data to traders and portfolio managers.

As a result, the company’s earnings fell 1.8% in the three months ended September 30, 2012, to $445 million from $453 million a year earlier (all amounts except share price and market cap in U.S. dollars). Due to fewer shares outstanding, earnings per share were unchanged at $0.54.

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p>RIOCAN REAL ESTATE INVESTMENT TRUST $27 (Toronto symbol REI.UN; Aggressive Growth Portfolio, Manufacturing & Industry sector; Units outstanding: 298.6 million; Market cap: $8.1 billion; Price-to-sales ratio: 5.0; Dividend yield: 5.1%; TSINetwork Rating: Average; www.riocan.com) has completed its deal to buy full control of 21 shopping malls in the U.S. from Cedar Shopping Centers, Inc. (New York symbol CDR).Previously, RioCan had an 80% stake in these malls through a joint venture with Cedar. It now owns 49 malls in the U.S., and 289 in Canada. RioCan paid $39.0 million U.S. for these properties. To put that price in context, it earned $125 million (Canadian) in the three months ended September 30, 2012. That’s down 25.6% from $168 million a year earlier. Earnings per unit fell 33.3%, to $0.42 from $0.63, on more units outstanding.

However, the best way to assess a real estate investment trust’s operating performance is to look at its cash flow. That’s because it excludes nonrecurring items, like gains on the sale of real estate. RioCan’s cash flow rose 18.6% in the quarter, to a record $115 million from $97 million. Cash flow per unit rose 8.1%, to $0.40 from $0.37.

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ENCANA CORP. $22 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $16.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.6%; TSINetwork Rating: Average; www.encana.com) is one of North America’s largest natural gas producers. The U.S. accounts for 55% of Encana’s production, while Canada supplies the remaining 45%. The company’s proven reserves should last over 14 years. If you include properties where estimates are less well defined, Encana’s reserves could last 50 years.

On December 1, 2009, the old EnCana Corp. split itself into two new companies: the new Encana and Cenovus Energy Toronto symbol CVE), which specializes in oil sands projects, oil refineries and conventional natural gas. The new Encana’s revenue fell 4.5%, from $8.9 billion in 2010 to $8.5 billion in 2011 (all amounts except share price and market cap in U.S. dollars). New techniques, such as horizontal drilling, have unlocked large amounts of shale gas. This has increased inventories and cut gas prices: the company sold its gas for $4.96 per thousand cubic feet in 2011, down 9.5% from $5.48 in 2010.

Earnings fell 33.3%, to $0.54 a share (or a total of $398 million) from $0.81 (or $598 million). Cash flow per share fell 5.4%, to $5.66 from $5.98.

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Pat McKeough responds to many personal questions about specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for the Inner Circle. This week, we received a question from an Inner Circle member on an Italian eyewear company whose products range from popular brands like LensCrafters to luxury names like Prada. The company, which trades as an ADR, makes the majority of its sales in North America, and Pat looks at its prospects for growth in an uncertain global economy....