CP

RESEARCH IN MOTION INC., $55.78, Toronto symbol RIM, reported better-than-expected earnings this week. However, the stock fell 11%. That’s because the company’s sales forecast for the current quarter fell short of the consensus estimate. In its 2011 fiscal year, which ended February 26, 2011, RIM’s earnings rose 38.8% to $3.4 billion from $2.5 billion in fiscal 2010 (all amounts except share price in U.S. dollars). Earnings per share rose 47.1%, to $6.34 from $4.31, on fewer shares outstanding. That beat the consensus estimate of $6.29 a share. The company shipped a record 52.3 million BlackBerry smartphones in fiscal 2011, up 43% from the prior year. That’s why revenue rose 33.1%, to $19.9 billion from $15.0 billion....

CANADIAN PACIFIC RAILWAY LTD. $66.56 (Toronto symbol CP; Shares outstanding: 169.1 million; Market cap: $11.3 billion; TSINetwork Rating: Average; Dividend yield: 1.6%; www.cpr.ca) reports that its earnings rose 18.3% in 2010, to $650.7 million from $550.0 million in 2009. Earnings per share rose 16.7%, to $3.85 from $3.30, on more shares outstanding. If you exclude unusual items, such as foreign-exchange losses on CP’s U.S.-dollar-denominated loans and gains on real-estate sales, earnings per share would have risen 54.2%, to $3.87 from $2.51. The latest earnings beat the consensus earnings estimate of $3.80 a share. CP’s revenue rose 13.2%, to $5.0 billion from $4.4 billion in 2009. The company saw revenue gains from fertilizer (up 53.5%), automotive (up 38.0%), consumer and industrial products (up 14.8%), intermodal (up 12.5%), coal (up 10.6%) and forest products (up 5.0%). Revenue from grain shipments fell 0.1%....

CGI GROUP INC., $19.17, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That makes its clients more efficient, and lets them focus on their main businesses. In its fiscal 2011 first quarter, which ended December 31, 2010, CGI earned $126.6 million. That’s up 13.8% from $111.2 million a year earlier. The company paid $81.0 million to buy back shares during the quarter. Due to fewer shares outstanding, earnings per share rose 21.6%, to $0.45 from $0.37. That easily beat the consensus earnings estimate of $0.34 a share. As a result, the stock gained 5% this week. Revenue rose 22.7%, to $1.1 billion from $913.0 million a year earlier. If you exclude the negative impact of exchange rates, revenue would have risen 25.9%. Canadian revenue rose 0.5%, but U.S. revenue jumped 77.1%, because the company won a number of new federal government contracts. The U.S. gain also reflects the contribution of Stanley Inc., which CGI bought last year. Stanley provides computer-outsourcing services to military and civilian agencies of the U.S. government....

CGI GROUP INC. $18.09, Toronto symbol GIB.A, is our Stock of the Year for 2011. Next week, Stock Pickers Digest, our newsletter for aggressive investors, will reveal its #1 pick for 2011. If you’re not already a Stock Pickers Digest subscriber, click here to learn how you can get one month—including the Stock Pickers Digest Stock of the Year—FREE. CGI is Canada’s largest provider of computer-outsourcing services. The company’s services help its customers automate certain routine functions, such as accounting and buying supplies. That lets CGI’s clients focus on their main businesses, and improve their efficiency. CGI is more speculative than most of our other recommendations. It does not pay a dividend, and its major shareholders control the company through multiple-voting shares. Its aggressive growth-by-acquisition strategy also adds risk....

TORSTAR $11.92 (Toronto symbol TS.B; Shares outstanding: 78.9 million; Market cap: $940.5 million; TSINetwork Rating: Above Average; Dividend yield: 3.1%; www.torstar.com) is one of three firms that have taken control of The Canadian Press (CP). The other two are CTVglobemedia (which owns The Globe and Mail) and Power Corp. subsidiary Square Victoria Communication Group (which owns La Presse). CP provides news and other content to Canadian newspapers, radio and TV stations. It also has an exclusive agreement to distribute Associated Press news in Canada. The three companies have restructured CP. That will improve CP’s long-term prospects, and ensure that it continues to provide content to Torstar’s newspapers....

CANADIAN PACIFIC RAILWAY LTD. $66.32 (Toronto symbol CP; Shares outstanding: 169.1 million; Market cap: $11.2 billion; SI Rating: Average; Dividend yield: 1.6%; www.cpr.ca) reported 27.4% higher earnings per share in the three months ended September 30, 2010, to $1.21 from $0.95. CP’s revenue rose 15.0%, to $1.3 billion from $1.1 billion a year earlier. The company’s operating ratio improved to 73.7% from 76.4% a year earlier. (Operating ratio is calculated by dividing a company’s regular operating costs by its revenue. The lower the ratio, the better.) That’s because the company is improving its productivity by increasing the length and speed of its trains....

SNC-LAVALIN GROUP INC., $52.10, Toronto symbol SNC, has cancelled its plan to increase its stake in Highway 407, a 108-kilometre toll highway north of Toronto. The company owns 16.77% of the 407. Earlier this month, the Canadian Pension Plan Investment Board (CPPIB) agreed to buy 10% of Highway 407 from the highway’s main shareholder, Ferrovial S.A. of Spain. Ferrovial currently owns 53% of the 407. However, SNC said it would exercise its right of first refusal and buy the shares from Ferrovial. That would have increased SNC’s stake in the 407 to 26.77%....

Railways have been around since the 19th century, and they are still the safest, most energy-efficient way to move goods over land. They also face little competition from new competitors, because of the high cost of building new rail lines. Canadian Pacific remains our favourite railway for new buying. It has close relationships with major producers of coal, potash and other commodities. That gives it predictable revenue streams. As well, new, fuel-efficient locomotives and scheduling software are lowering CP’s costs. CANADIAN PACIFIC RAILWAY LTD. $63 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 168.7 million; Market cap: $10.6 billion; Price-to-sales ratio: 2.3; Dividend yield: 1.7%; SI Rating: Above Average) transports freight over a 25,000-kilometre rail network between Montreal and Vancouver. It also connects with major hubs in the U.S. Midwest and Northeast. The U.S. accounts for 30% of CP’s revenue....

CENOVUS ENERGY INC., $28.74, Toronto symbol CVE, has received regulatory approval to expand its Foster Creek oil-sands project in northern Alberta. Cenovus owns 50% of this project; U.S.-based oil company ConocoPhillips (New York symbol COP) owns the other 50%. The company will expand Foster Creek in three phases over the next seven years. When the expansion is finished, Foster Creek’s average daily production will rise to 210,000 barrels from the current 120,000 barrels. Cenovus has also asked for approval for a fourth phase, which would bring Foster Creek’s average daily production up to 235,000 barrels, starting in 2019. Cenovus’ share is 117,500 barrels. To put these figures in context, Cenovus’ average daily production, including natural gas, was 253,733 barrels in its latest quarter....

IMPERIAL OIL $39.55 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $33.5 billion; SI Rating: Average; Dividend yield: 1.1%) has formed a new joint venture with parent company ExxonMobil Corp. (New York symbol XOM) and BP plc (New York symbol BP). This new company will explore for oil and natural gas in the Beaufort Sea. Imperial and Exxon will each own a 25% stake in the venture, and BP will own 50%. Underwater exploration in the arctic is hugely expensive, so this joint venture will help all three partners lower their costs. Developing these offshore fields would also help Imperial with its plan to build a new pipeline that would pump gas from the Mackenzie Delta to Alberta. However, exploration will have to wait while regulators review offshore drilling safety standards in the wake of BP’s oil spill in the Gulf of Mexico....