CP

CANADIAN PACIFIC RAILWAY LTD., $80.03, Toronto symbol CP, continues to make progress with its plan to improve its efficiency with new trains and streamlined schedules. This week, the company launched its new transcontinental service for intermodal containers (which can be shipped by rail, ship or truck). This new service uses a more direct route with fewer stops. As a result, CP can now ship containers from Vancouver to Toronto in four days instead of five. Shipping to Chicago also takes four days, down from six. CP is our #1 buy for 2012....

LOBLAW CO. $32.56 (Toronto symbol L; Shares outstanding: 281.4 million; Market cap: $9.2 billion; TSINetwork Rating: Above Average; Dividend yield: 2.6%; www.loblaw.ca) starting selling its popular Joe Fresh clothing and accessories in its supermarkets in 2006. It has also opened 12 stand-alone Joe Fresh stores in Canada and six in the U.S. Loblaw has formed a new partnership with J.C. Penney (New York symbol JCP). Under this deal, Loblaw will build Joe Fresh boutiques in 700 of Penney’s 1,100 U.S. department stores. (J.C. Penney is a recommendation of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks.) These outlets should open in April 2013. Penney will also sell Joe Fresh products through its website. Loblaw is a buy....

CANADIAN PACIFIC RAILWAY $75.81 (Toronto symbol CP; Shares outstanding: 171.2 million; Market cap: $13.0 billion; TSINetwork Rating: Average; Dividend yield: 1.9%; www.cpr.ca) has appointed Hunter Harrison as a director and its new chief executive officer.

Mr. Harrison is the former CEO of Canadian National Railway Co. (Toronto symbol CNR). He’s also the choice of prominent U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of CP.

The company believes Mr. Harrison will duplicate his success at CN, which included improving efficiency and speeding up deliveries. New trains and the recent drop in oil prices should also boost CP’s profits.

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The New York Stock Exchange defines a blue chip as stock in a company with a national reputation for quality, reliability and the ability to operate profitably in good times and bad. The problem is that “reputation” plays a key role in the definition. Many companies acquire a blue-chip reputation by displaying the qualities that the definition suggests. Others get it through a strong public relations effort or by being in the right industry or business situation at the right time and place. Regardless of how it got there, this blue-chip label sticks with companies long after they quit living up to it....

CANADIAN PACIFIC RAILWAY LTD., $83.18, Toronto symbol CP, reported higher-than-expected earnings this week. That caused the stock to rise 10%. In the three months ended June 30, 2012, the company’s earnings fell 19.5%, to $103 million, or $0.60 a share. It earned $128 million, or $0.75 a share, a year earlier. A nine-day strike by CP’s locomotive engineers, conductors and yard workers cut its earnings by around $0.30 a share in the latest quarter. In addition, the company paid severance costs to its previous CEO and other expenses related to the hiring of Hunter Harrison as its new chief executive. These costs cut CP’s earnings by a further $0.30 a share....

CANADIAN PACIFIC RAILWAY LTD. $74 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.9 million; Market cap: $12.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.cpr.ca) has signed a long-term deal with U.S. Silica Holdings Inc. (New York symbol SLCA), a leading maker of specialized sand.

Oil and gas exploration companies pump this sand, along with water and other chemicals, into shale rock formations. This fractures the rock and releases the oil and gas.

Under the terms of this multi-year deal, Silica will use CP trains to ship sand from its new Sparta, Wisconsin facility to its customers. CP did not say how much this deal is worth, but it should help the company profit from rising production of shale oil in the Bakken area, which covers parts of Montana, North Dakota and Saskatchewan.

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CANADIAN PACIFIC RAILWAY LTD., $75.49, Toronto symbol CP, has formed a partnership with Smart Sand Inc., a private company that sells sand to oil and gas producers. These clients pump this sand, along with water and other chemicals, into shale rock formations. This fractures the rock and releases the oil and gas. Under the deal, CP and Smart Sand will build a new facility in North Dakota that will load the sand onto CP’s trains. From there, CP will deliver the sand to Smart Sand’s customers in the Williston Basin, which covers parts of North and South Dakota, Montana and Saskatchewan. CP did not say how much this new facility would cost, but it should begin operating in early 2013....

CANADIAN PACIFIC RAILWAY LTD. $74 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 170.9 million; Market cap: $12.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.9%; TSINetwork Rating: Above Average; www.cpr.ca) has signed a long-term deal with U.S. Silica Holdings Inc. (New York symbol SLCA), a leading maker of specialized sand. Oil and gas exploration companies pump this sand, along with water and other chemicals, into shale rock formations. This fractures the rock and releases the oil and gas. Under the terms of this multi-year deal, Silica will use CP trains to ship sand from its new Sparta, Wisconsin facility to its customers. CP did not say how much this deal is worth, but it should help the company profit from rising production of shale oil in the Bakken area, which covers parts of Montana, North Dakota and Saskatchewan....

CANADIAN PACIFIC RAILWAY $75.81 (Toronto symbol CP; Shares outstanding: 171.2 million; Market cap: $13.0 billion; TSINetwork Rating: Average; Dividend yield: 1.9%; www.cpr.ca) has appointed Hunter Harrison as a director and its new chief executive officer. Mr. Harrison is the former CEO of Canadian National Railway Co. (Toronto symbol CNR). He’s also the choice of prominent U.S.-based activist investment firm Pershing Square Capital Management, which owns 14.2% of CP. The company believes Mr. Harrison will duplicate his success at CN, which included improving efficiency and speeding up deliveries. New trains and the recent drop in oil prices should also boost CP’s profits....

BANK OF NOVA SCOTIA $52.20 (Toronto symbol BNS: Shares outstanding: 1.1 billion; Market cap: $57.4 billion; TSINetwork Rating: Above Average; Div. yield: 4.2%, www.scotiabank.com) is the third-largest of Canada’s five big banks, with assets of $659.7 billion.

Without one-time items, the bank earned $1.15 a share in the quarter ended April 30, 2012, up 8.5% from $1.06 a share a year earlier. It is also setting aside less money to cover bad loans: loan-loss provisions fell 2.2%, to $264 million from $270 million a year ago.

The Canadian banking division’s earnings jumped 23.3% due to an increase in deposits and higher demand for loans. The division also did a good job of controlling its costs.

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