cn rail

BLACKBERRY LTD., $8.28, Toronto symbol BB, has accepted a $9.00 U.S.-a-share takeover offer from a consortium led by Fairfax Financial Holdings (Toronto symbol FFH). Fairfax is the smartphone maker’s largest investor, with roughly 10% of its outstanding shares. This tentative agreement gives BlackBerry until November 4, 2013, to secure a better deal. It will also give Fairfax and its potential partners time to examine BlackBerry’s financial condition. If BlackBerry accepts a rival offer, it will have to pay a $157.2-million U.S. break fee to Fairfax. That fee would rise to around $262 million U.S. if the company signs a binding deal with Fairfax and does not go through with it. However, Fairfax would not have to pay a fee if it cancels the deal....

TECK RESOURCES LTD., $25.11, Toronto symbol TCK.B, reported lower results this week due to weaker metallurgical coal and copper prices. Even so, the latest revenue and earnings beat the consensus forecasts. In the three months ended June 30, 2013, Teck’s earnings fell 50.5%, to $197 million, or $0.34 a share. These figures exclude unusual items, such as foreign exchange losses and asset writedowns. On this basis, the latest earnings beat the consensus estimate of $0.31 a share. A year earlier, Teck earned $398 million, or $0.68 a share. Revenue fell 16.0%, to $2.2 billion from $2.6 billion. Even with the decline, the latest figure also beat the consensus estimate of $2.1 billion....

CANADIAN PACIFIC RAILWAY LTD., $131.73, Toronto symbol CP, continues to benefit from rising shipments of crude oil by rail. That’s because a lack of pipelines is forcing producers to find other ways to transport their oil to refineries. However, last Saturday’s derailment and explosion of a train hauling crude oil in Lac-Mégantic, Quebec, could slow down the oil-by-rail boom. (Note: a rival firm, Montreal, Maine & Atlantic Railway, operated this train, not CP.) The crash will likely lead to new regulations, such as requirements for thicker-hulled tanker cars that can better withstand collisions. Regulators may also demand that railways place more workers on their trains and install automatic braking equipment....

TRANSCANADA CORP., $45.59, Toronto symbol TRP, has completed the purchase of a solar power facility in Brockville, Ontario, from Canadian Solar (Nasdaq symbol CSIQ). This is the first part of TransCanada’s agreement to buy nine Ontario solar power stations from Canadian Solar. The company expects to take possession of the remaining eight facilities by the end of 2014. In all, TransCanada will pay $470 million. That’s equal to 1.3 times the $370 million, or $0.52 a share, that the company earned in the three months ended March 31, 2013....

Kansas City Southern, $109.98, symbol KSU on New York (Shares outstanding: 110.2 million; Market cap: $12.1 billion; www.kcsouthern.com), is a holding company that has railroad investments in the U.S., Mexico and Panama. Its main holding is the Kansas City Southern railway, which serves the central and south-central U.S. It also owns Kansas City Southern de Mexico, which operates in that country’s northeast and central regions, as well as the port cities of Lazaro Cardenas, Tampico and Veracruz. In addition, Kansas City Southern holds 50% of the Panama Canal Railway, which ships freight, as well as offering passenger service, from the Atlantic to the Pacific oceans running alongside the Panama Canal....

CANADIAN NATIONAL RAILWAY CO. $102 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 424.1 million; Market cap: $43.3 billion; Price-to-sales ratio: 4.3; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.cn.ca) operates Canada’s largest railway. The company’s 32,350-kilometre network stretches across Canada and through the U.S. Midwest to the Gulf of Mexico.

Ottawa nationalized CN in 1918 because of the vital role the company played in Canada’s early growth. In 1995, CN became a publicly traded company. Unlike CP, Ottawa limits a single investor’s ownership in CN to 15%.

Due to a drop in freight volumes during the recession, CN’s revenue fell 13.1%, from $8.5 billion in 2008 to $7.4 billion in 2009. Revenue recovered to $8.3 billion in 2010 and surged to $9.9 billion in 2012.

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We made CP Rail (see box at right) our “Stock of the Year” for 2012 because we felt its earnings would jump if it cut costs and made better use of its trains. A U.S.-based activist investor agreed with us and brought in CN Rail’s former chief executive officer, Hunter Harrison, who helped make CN North America’s most efficient railroad.

Some investors feel that a stronger CP will hurt CN....

BLACKBERRY INC., $15.09, Toronto symbol BB, rose 2% on Thursday after the company reported much better-than-expected earnings. In its 2013 fourth quarter, which ended March 2, 2013, BlackBerry earned $114 million, or $0.22 a share (all amounts except share price in U.S. dollars). These figures exclude charges related to a restructuring plan that includes cutting the company’s workforce and simplifying its product lines. On that basis, the latest results easily beat the consensus forecast of a $0.34-a-share loss. A year earlier, BlackBerry lost $118 million, or $0.23 a share. Revenue fell 35.9%, to $2.7 billion from $4.2 billion. That’s mainly because customers were waiting for the company to launch new smartphones that use its BlackBerry 10 software. The company began selling these devices in Canada, the U.K. and other markets in February 2013. It started selling them in the U.S. on March 22, 2013....

CANADIAN NATIONAL RAILWAY CO. $96 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 428.4 million; Market cap: $41.1 billion; Price-to-sales ratio: 4.0; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.cn.ca) earned $2.5 billion in 2012. That’s up 11.9% from $2.2 billion in 2011. The company spent $1.4 billion on share buybacks during the year. Because of fewer shares outstanding, earnings per share rose 15.9%, to $5.61 from $4.84.

Revenue rose 9.9%, to $9.9 billion from $9.0 billion. The company continues to benefit from rising trade between North America and Asia. CN also raised its freight rates and fuel surcharges.

CN’s operating costs rose 9% in 2012, mainly due to higher labour and fuel expenses. Even so, CN’s operating ratio improved to 62.9% from 63.5%. (Operating ratio is calculated by dividing a company’s regular operating costs by its revenue. The lower the ratio, the better.)

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Canada’s top two railways continue to focus on cutting costs and streamlining their operations. That puts them in a better position to handle changing demand for the cyclical products they transport, such as coal, oil and grain.

CANADIAN NATIONAL RAILWAY CO....