CP

CANADIAN PACIFIC RAILWAY LTD. $51.38 (Toronto symbol CP; Shares outstanding: 168.5 million; Market cap: $8.7 billion; SI Rating: Average; Dividend yield: 1.9%) reports that its 2009 earnings fell 25.7%, to $460.3 million from $619.7 million in the prior year, mainly due to the recession. Earnings per share fell 30.8%, to $2.76 from $3.99, on more shares outstanding. These figures exclude gains on two sales: the company sold Windsor Station in Montreal and land in western Canada during 2009. As well, CP recognized a $4.5-million gain on the notes it received as part of the restructuring of Canada’s asset-backed commercial-paper market. In the prior year, it was forced to write down $34.8 million of these assets. On this basis, CP’s 2009 earnings beat the consensus estimate of $2.65 a share. Overall revenue fell 12.7%, to $4.3 billion from $4.9 billion. Revenue from grain shipments rose 5.5%, but all other categories fell, including fertilizers (down 41.5%), forest products (down 30.4%), automotive (down 30.1%), coal (down 28.8%), and consumer and industrial products (down 16.7%). CP gets just 30% of its revenue from the U.S., so the higher Canadian dollar hurts the company’s results....

CANADIAN NATIONAL RAILWAY CO., $53.52, Toronto symbol CNR, earned $1.5 billion in 2009. That’s down 13.8% from $1.8 billion in the prior year. Earnings per share fell 12.7%, to $3.24 from $3.71, on fewer shares outstanding. These figures exclude unusual items, including income-tax refunds and gains on sales of two small railway lines. Despite the drop, the latest earnings beat the $3.22 a share that analysts were expecting. Revenue fell 13.2%, to $7.4 billion from $8.5 billion. The recession hurt revenue at all of CN’s freight groups: The automotive group’s revenue fell 24%, followed by metals and minerals (down 23%), forest products (down 20%), consumer and industrial goods (down 15%), petroleum and chemicals (down 6%), coal (down 3%), and grain and fertilizers (down 3%)....

CANADIAN PACIFIC RAILWAY LTD. $56.14 (Toronto symbol CP; Shares outstanding: 168.3 million; Market cap: $9.4 billion; SI Rating: Average; Dividend yield: 1.8%) is contributing $500 million to its employee defined-benefit pension plan. The company hopes the voluntary payment to the plan will make its future pension obligations easier to manage. As of September 30, 2009, CP held cash of $615.9 million, or $3.66 a share, so it can comfortably afford this payment. The move will have little impact on CP’s earnings. The company now estimates that its 2010 pension obligation will be between $150 million and $200 million. That’s down from its earlier range of $250 million to $300 million....

TORONTO-DOMINION BANK, $65.33, Toronto symbol TD, had to set aside more funds to cover bad loans in its latest fiscal year. However, the bank still reported higher earnings, as low interest rates spurred strong demand for new loans. TD earned $4.7 billion in the year ended October 31, 2009. That’s up 23.7% from $3.8 billion in the prior year. Earnings per share rose 9.6%, to $5.35 from $4.88, on more shares outstanding. These figures exclude several unusual items, including writedowns of securities the bank holds, and costs to integrate U.S.-based Commerce Bancorp, which TD bought last year. On that basis, the latest earnings beat the $5.07 a share that analysts were expecting. Loan-loss provisions jumped 133.3%, to $2.5 billion from $1.1 billion. Revenue rose 21.8%, to $17.9 billion from $14.7 billion....

Warren Buffett’s Berkshire Hathaway recently offered $44 billion U.S. for 77% of U.S.-based railway Burlington Northern Santa Fe. (Berkshire already owns 23%.) This lifted the shares of other big railways, including CN and CP. Despite the jump, both still trade at reasonable multiples of their earnings. As well, both are cutting costs. This will help their earnings grow as the economy recovers. CANADIAN NATIONAL RAILWAY CO. $57 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 470.1 million; Market cap: $26.8 billion; Price-to-sales ratio: 3.5; SI Rating: Above Average) operates the largest freight-rail network in Canada. It also serves 16 U.S. states. The recession continues to hurt demand for rail service. CN’s earnings fell 12.7% in the third quarter of 2009, to $446 million from $511 million a year earlier. Earnings per share fell 12.1%, to $0.94 from $1.07. These figures exclude unusual items, mainly income-tax recoveries to reflect adjustments made to prior years. As well, CN gets half of its revenue from its U.S. operations, so the U.S. dollar’s rise since last year added $0.03 a share to its latest earnings. Revenue fell 18.3%, to $1.8 billion from $2.3 billion....

Warren Buffett’s Berkshire Hathaway Inc. recently announced that it will buy the 77% of U.S.-based railway Burlington Northern Santa Fe Corp. that it doesn’t already own. The company will pay $44 billion U.S. to complete the takeover. Burlington Northern owns one of the largest railroad networks in the U.S., with about 51,500 kilometres of track. ...

RIOCAN REAL ESTATE INVESTMENT TRUST, $18.34, Toronto symbol REI.UN, announced its first expansion into the U.S. this week. The trust has formed a joint venture with Cedar Shopping Centers, Inc. (New York symbol CDR). Cedar owns shopping centres in northeastern and mid-Atlantic regions of the U.S. The new joint venture will hold seven of Cedar’s malls in Massachusetts, Pennsylvania and Connecticut. RioCan will own 80% of this new company. It will also receive common shares and warrants in Cedar. Exercising these warrants would give RioCan a 15% stake in Cedar....

Burlington Northern Santa Fe Corp., $85.59, symbol BNI on New York (Shares outstanding: 340.0 million; Market cap: $29.1 billion), owns one of the largest railroad networks in the U.S., with about 51,500 kilometres of track. The recession has hit the company hard. The economy is recovering, but construction and manufacturing, two segments that are very important to Burlington Northern, may be slower to bounce back. Consumer and industrial products make up 55% of the Burlington Northern’s shipments. The shares have risen from $50.58 in March, but they may have trouble moving higher. We don’t recommend Burlington Northern....

CANADIAN PACIFIC RAILWAY LTD. $53 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 168.1 million; Market cap: $8.9 billion; Price-to-sales ratio: 1.4; SI Rating: Above Average)...

An economic recovery will increase CP Rail’s shipments of forest products, coal, potash, grain, cars and auto parts. This, in turn, will lift its revenue and profits. Meanwhile, CP has aggressively cut its costs. This should further add to profits when shipments rebound. CANADIAN PACIFIC RAILWAY LTD. $49.78 (Toronto symbol CP; Shares outstanding: 168.1 million; Market cap: $8.4 billion; SI Rating: Above Average) ships freight over a rail network between Montreal and Vancouver. In the United States, CP subsidiaries connect its Canadian lines to major hubs in the midwest and northeast. In the three months ended June 30, 2009, CP Rail’s revenue fell 16.2%, to $1.02 billion from $1.22 billion. Earnings rose 1.7%, to $157.3 million from $154.7 million. Earnings per share fell 7.0%, to $0.93 from $1.00, on more outstanding shares....