canadian tire

TRANSCANADA CORP., $40.81, Toronto symbol TRP, fell 4% this week after the U.S. State Department said it wants the company to re-route its proposed Keystone XL oil pipeline around underground water tables in Nebraska. Keystone XL will pump oil from oil-sands projects in Alberta through Oklahoma to refineries on the U.S. Gulf Coast. TransCanada had hoped to receive final approval for the project by the end of 2011, but finding an acceptable new route will take around 18 months. These delays would add to Keystone XL’s $7-billion U.S. cost, and might prompt oil shippers and refineries to cancel their commitments....

CANADIAN TIRE CORP. $58 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.4 million; Market cap: $4.7 billion; Price-to-sales ratio: 0.5; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.canadiantire.ca) will now install some of the household equipment it sells, such as garage-door openers, hot water tanks and central vacuum systems. Previously, customers had to install these items themselves, or hire professionals to do it for them. The company can now offer installation as a package deal with these products. That should attract more customers, and help it compete with retailers who already provide this service. Canadian Tire is a buy.

CANADIAN TIRE CORP., $56.03, Toronto symbol CTC.A, closed its e-commerce site in 2009, because this site was never as profitable as the company’s retail stores. However, the trend toward online shopping continues to grow, so this week the company launched a new web site that mainly sells tires. Orders will be shipped to a nearby Canadian Tire store, where a mechanic can install them. Canadian Tire is one of the few retailers that sells tires over the Internet. That should give this new site an advantage. As well, customers will probably buy more goods at the company’s stores while they wait for their tires to be installed....

RIOCAN REAL ESTATE INVESTMENT TRUST $25.57 (Toronto symbol REI.UN; Units outstanding: 264.0 million; Market cap: $6.7 billion; TSINetwork Rating: Average; Dividend yield: 5.4%; www.riocan.com) is Canada’s largest REIT. It has interests in 305 shopping malls in Canada, including 10 under development. These properties contain over 73 million square feet of leasable area. RioCan’s occupancy rate is 97.5%. RioCan also owns an 80% interest in 35 malls in the U.S. through joint ventures. As well, it owns 14% of Cedar Shopping Centers, a U.S. REIT that owns malls anchored by supermarkets and drug stores, mainly in the northeastern U.S. In the three months ended June 30, 2011, revenue rose 12.3%, to $228 million from $203 million a year earlier. Cash flow per unit rose 5.9%, to $0.36 from $0.34. RioCan’s units yield 5.4%....

The Canadian consumer sector is highly competitive. Aside from other domestic retailers, Canadian retailers face rising competition from large U.S. discount retailers, like Wal-Mart and Costco. In addition, popular U.S. retailer Target is now expanding into Canada, and will begin opening its Canadian stores in early 2013. As well, consumer stocks are more exposed to swings in the overall economy than companies in some other sectors, such as utilities.

Aggressive portfolio: Smaller retailers entail greater risk, but offer the potential for strong gains

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CANADIAN TIRE CORP., $56.55, Toronto symbol CTC.A, reported lower-than-expected earnings this week. In the three months ended July 2, 2011, the company earned $105.8 million, or $1.29 a share. That missed the consensus estimate of $1.45 a share. The latest earnings are also down 13.8% from $122.8 million, or $1.50 a share, a year earlier. Canadian Tire spent more on advertising. As well, cooler spring weather hurt sales of seasonal merchandise, such as gardening equipment. Canadian Tire’s earnings were also held back by costs related to the upcoming, $771-million purchase of The Forzani Group Ltd. (Toronto symbol FGL). Forzani sells sporting goods through over 500 stores in Canada, including SportChek and Athlete’s World. Canadian Tire aims to complete this purchase by the end of September 2011....

Tim Hortons (symbol THI on Toronto) has long been seen as an iconic Canadian company. Co-founded by Canadian hockey player Tim Horton, the company opened its first outlet in Hamilton, Ontario, in 1964. At the time, the shop offered only two menu items: coffee and donuts. The company added a variety of new menu items over the following years, such as the Timbit (a bite-sized donut ball) and new muffins and cakes. In 1999, Tims added iced cappuccinos to its menu....

PLEASE NOTE: Our next Hotline will go out on Friday, July 8, 2011. SNC-LAVALIN GROUP INC., $58.88, Toronto symbol SNC, rose 9% this week in response to its purchase of certain assets of Atomic Energy of Canada Ltd. from the federal government. The purchase mainly consists of Atomic Energy’s Candu nuclear-reactor division. All of Canada’s reactors use the Candu design and technology. The division has also sold reactors to Argentina, Romania, India, South Korea and China....

Transcontinental Inc., Toronto symbol TCL.A, is the largest commercial printer in Canada and Mexico, and the fourth-largest in North America. It also publishes newspapers and magazines. Transcontinental is one of the income investing stocks we analyze in our flagship newsletter, The Successful Investor. Transcontinental also has over 300 web sites. These web sites will become more important to the company’s growth in the next few years, as advertisers spend more on the Internet than on print products....

CANADIAN TIRE CORP., $62.38, Toronto symbol CTC.A, is buying The Forzani Group Ltd. (Toronto symbol FGL), which sells sporting goods through over 500 stores in Canada, including SportChek and Athlete’s World. Forzani gets 70% of its sales by selling clothing and footwear, so there is little overlap with the sports equipment (such as skates and hockey sticks) that Canadian Tire stores mainly sell. To put the $771-million purchase price in context, Canadian Tire earned $58.4 million, or $0.71 a share, in the three months ended April 2, 2011. That missed the consensus estimate of $0.72 a share. Still, the latest earnings are up 13.2% from $51.6 million, or $0.63 a share, a year earlier....