cp rail

ENCANA CORP., $23.86, Toronto symbol ECA, has agreed to buy Athlon Energy Inc. (New York symbol ATHL). Athlon produces 30,000 barrels of oil equivalent (80% oil and 20% natural gas) a day from 1,138 wells in Texas’s Midland Basin. To put that in context, Encana’s daily output was 491,700 barrels (86% gas, 14% oil) in the second quarter of 2014. Right now, Athlon uses traditional vertical drilling techniques. However, Encana feels it can use its expertise with horizontal drilling to make Athlon’s wells more productive. That will help Encana reach its goal of producing 250,000 barrels of oil a day by 2017....

Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day, at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....

CANADIAN PACIFIC $202.20 (Toronto symbol CP; Shares outstanding: 175.1 million; Market cap: $35.7 billion; TSINetwork Rating: Average; Dividend yield: 0.7%; www.cpr.ca) reports that its earnings jumped 47.2% in the three months ended June 30, 2014, to $371 million, or $2.11 a share. A year earlier, the company earned $252 million, or $1.43 a share.

The higher earnings mainly resulted from CP’s plan to improve its efficiency with new locomotives, better tracks and software that optimizes train loads and speeds. Revenue rose 12.3%, to $1.7 billion from $1.5 billion.

The company’s operating ratio improved to 65.1% from 71.9% a year ago. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.) CP now feels it can cut its full-year operating ratio to 63% or lower in 2014.

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ROYAL BANK OF CANADA, $80.80, Toronto symbol RY, earned $2.4 billion in the three months ended July 31, 2014, up 10.2% from $2.2 billion a year earlier. Per-share earnings rose 11.0%, to $1.62 from $1.46, on fewer shares outstanding. These figures exclude unusual items, such as a $40-million loss on the recent sale of Royal’s Jamaican banking operations. On this basis, the latest earnings beat the consensus estimate of $1.54 a share. Revenue jumped 25.2%, to $9.0 billion from $7.2 billion. The bank set aside $283 million to cover bad loans in the latest quarter, up 6.0%, from $267 million. That’s mainly due to higher provisions at its Caribbean and Canadian corporate lending operations....

CANADIAN PACIFIC $202.20 (Toronto symbol CP; Shares outstanding: 175.1 million; Market cap: $35.7 billion; TSINetwork Rating: Average; Dividend yield: 0.7%; www.cpr.ca) reports that its earnings jumped 47.2% in the three months ended June 30, 2014, to $371 million, or $2.11 a share. A year earlier, the company earned $252 million, or $1.43 a share. The higher earnings mainly resulted from CP’s plan to improve its efficiency with new locomotives, better tracks and software that optimizes train loads and speeds. Revenue rose 12.3%, to $1.7 billion from $1.5 billion. The company’s operating ratio improved to 65.1% from 71.9% a year ago. (Operating ratio is calculated by dividing regular operating costs by revenue. The lower the ratio, the better.) CP now feels it can cut its full-year operating ratio to 63% or lower in 2014....

ISHARES S&P/TSX 60 INDEX FUND $21.94 (Toronto symbol XIU; buy or sell through brokers; ca.ishares.com) is a good low-fee way to buy the top stocks on the TSX. The units are made up of stocks that represent the S&P/TSX 60 Index, which consists of the 60 largest, most heavily traded stocks on the exchange. Expenses are just 0.17% of assets.

The index mostly consists of high-quality companies. However, it must ensure that all sectors are represented, so it holds a few we wouldn’t include.

The index’s top holdings are Royal Bank, 8.1%; TD Bank, 7.4%; Bank of Nova Scotia, 6.4%; Suncor Energy, 4.8%; CN Railway, 4.2%; Canadian Natural Resources, 3.9%; Bank of Montreal, 3.7%; Enbridge, 3.1%; Valeant Pharmaceuticals, 3.0%; Manulife Financial, 2.9%; CIBC, 2.8%; BCE, 2.7%; TransCanada Corp., 2.6%; Potash Corp., 2.5%; CP Rail, 2.2%; and Cenovus, 1.9%.

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CANADIAN PACIFIC RAILWAY LTD., $209.09, Toronto symbol CP, gained 6% this week after reporting better than expected quarterly results. In the three months ended June 30, 2014, CP’s earnings jumped 47.2%, to $371 million, or $2.11 a share, beating the consensus estimate of $2.09. A year earlier, the company earned $252 million, or $1.43 a share. The higher earnings mainly resulted from CP’s plan to improve its efficiency with new locomotives, better tracks and software that optimizes train loads and speeds....

Exchange traded funds (ETFs) are set up to mirror the performance of a stock market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. That’s different from mutual funds, which you can only buy at the end of the day, at a price that reflects the fund’s value at the close of trading. Prices of ETFs are quoted in newspaper stock tables and online. You pay brokerage commissions to buy and sell them, but their low management fees give them a cost advantage over most mutual funds....

POWER CORP. $30.40 (Toronto symbol POW; Shares outstanding: 412.4 million; Market cap: $14.2 billion; TSINetwork Rating: Above Average; Div. yield: 3.8%; www.powercorporation.com) is a diversified holding company. It holds its financial assets through 65.8%-owned Power Financial. These financial assets include 68.1% of Great- West Lifeco, one of Canada’s largest life insurers (see article on Great-West Lifeco in this issue), and 58.7% of IGM Financial, a leading Canadian mutual fund provider. Power Financial also owns 50% of holding company Parjointco, which holds 55.6% of Switzerland- listed Pargesa Holdings SA. Pargesa has 95% of its assets in five large European companies: Imerys (minerals), Total SA (oil), Pernod Ricard (wine and spirits), Suez Environnement (energy, water and waste services) and Lafarge (cement and building materials). Power Corp. also has investments in Asia....

CANADIAN PACIFIC RAILWAY LTD., $200.48, Toronto symbol CP, and CANADIAN NATIONAL RAILWAY CO., $67.94, Toronto symbol CNR, both stand to gain as a lack of pipeline capacity in Western Canada forces oil producers to ship crude by rail. In 2013, oil shipments accounted for just 6% of CP’s revenue and 4% of CN’s revenue. However, an oil industry group now expects rail shipments to jump from 200,000 barrels a day in 2013 to 700,000 by 2016. Both companies are upgrading their networks to handle the rising demand. As well, Ottawa recently brought in new rules to phase out older tanker cars, like the ones that exploded in the July 2013 train crash in Lac-Mégantic, Quebec. Oil producers own most of these cars, so they would have to pay for their replacements, not the railways....