cp rail

MAPLE LEAF FOODS INC., $15.98, Toronto symbol MFI, rose 20% this week after the company announced that it plans to sell all of part of its 90.0% stake in Canada Bread (see below). Canada Bread is Canada’s second-largest producer of fresh and frozen baked goods, after Weston Bakery. It also makes pastas and sauces. Canada Bread supplies around a third of Maple Leaf’s sales. Maple Leaf’s stake in this business—currently worth $1.6 billion—is equal to 73% of Maple Leaf’s $2.2-billion market cap. The company would use the proceeds to fund a major restructuring of its meat-processing operations. This includes building new plants and eliminating unprofitable products. It’s also installing a new computer system that will give its managers more timely information. In addition, the cash would help Maple Leaf pay down its long-term debt of $1.3 billion....

In choosing a Stock of the Year, we aim for a “heads you win, tails you break even” situation. These stocks can put on above-average rises, but they’re unlikely to be disasters if they disappoint....

In choosing a Stock of the Year, we aim for a “heads you win, tails you break even” situation. These stocks can put on above-average rises, but they’re unlikely to be disasters if they disappoint.

Our past #1 picks, including Agrium (see page 101), sometimes take a year or more to get going....

IMPERIAL OIL $44.59 (Toronto symbol IMO; Shares outstanding: 847.6 million; Market cap: $38.2 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.imperialoil.ca) began operating its new Kearl oil sands project in Alberta in April 2013.

Imperial owns 71% of Kearl....

BLACKBERRY LTD., $9.08, Toronto symbol BB, fell 16% on Friday after the company announced that it will cut 40% of its workforce due to slow demand for its new BlackBerry 10 smartphones. In its fiscal 2014 second quarter, which ended August 31, 2013, BlackBerry sold 3.7 million phones. That’s down from 7.4 million phones a year earlier. BlackBerry will also write down the value of its unsold phones. As a result, it expects to report a loss of between $950 million, or $1.81 a share, and $995 million, or $1.90 a share, in the second quarter (all amounts except share price in U.S. dollars). If you exclude unusual items, it will still lose between $0.47 and $0.51 a share....

MAPLE LEAF FOODS INC., $14.44, Toronto symbol MFI, rose 8% on Friday after it agreed to sell its Rothsay rendering operations to Texas-based Darling International Inc. (New York symbol DAR). Rothsay recycles by-products from Maple Leaf’s main meat-processing operations into a variety of ingredients for other products, including animal feed, soaps, lotions, cosmetics, fertilizers and plastics. Rothsay also makes biodiesel fuels. Maple Leaf will receive $645 million when the deal closes, probably by the end of 2013. That’s equal to 32% of its $2.0-billion market cap (or the value of all of its outstanding shares)....

CP RAIL $127.77 (Toronto symbol CP; Shares outstanding: 175.1 million; Market cap: $22.6 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.cpr.ca) expects to ship 70,000 carloads of crude oil in 2013, up sharply from just 13,000 in 2011.

However, the July 6, 2013, derailment and explosion of a train in Lac-Mégantic, Quebec, could hurt the oil-by-rail boom....

FEDEX CORP. (New York symbol FDX; www.fedex.com) delivers packages and documents in the U.S. and over 220 other countries and territories. The stock has moved up in the past few weeks, partly due to speculation that activist investment firm Pershing Square Capital Management will soon make a significant investment in FedEx....

CANADIAN PACIFIC RAILWAY LTD. $129 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 175.0 million; Market cap: $22.6 billion; Price-to-sales ratio: 3.9; Dividend yield: 1.1%; TSINetwork Rating: Above Average; www.cpr.ca) expects to ship 70,000 carloads of crude oil in 2013, up sharply from just 13,000 in 2011.

However, the crash could hurt the oil-by-rail boom. (Note: Montreal, Maine and Atlantic Ltd., operated the train involved in the crash, not CP.)

It seems likely that regulators will require railways to replace their current tanker cars with models that can better withstand collisions. They may also demand that railways place more workers on their trains, and install automatic-braking equipment.
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CANADIAN PACIFIC RAILWAY $127.99 (Toronto symbol CP; Shares outstanding: 174.7 million; Market cap: $22.6 billion; TSINetwork Rating: Average; Dividend yield: 1.1%; www.cpr.ca) continues to benefit from its aggressive plan to improve its efficiency with new locomotives, upgraded tracks and software that optimizes train loads and speeds.

For example, CP has cut the time it takes to ship intermodal containers between Toronto and Calgary by 20 hours. The trip now takes 64 hours.

Speeding up service will help CP attract more customers. It will also help it reach its goal of lowering its operating ratio from 75.8% in the first quarter of 2013 to around 65% by the middle of 2016. (Operating ratio is calculated by dividing a railway’s regular operating costs by its revenue. The lower the ratio, the better.)
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