cp rail

CANADIAN PACIFIC RAILWAY LTD. $55 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 169.4 million; Market cap: $9.3 billion; Price-to-sales ratio: 1.9; Dividend yield: 2.2%; TSINetwork Rating: Above Average; www.cpr.ca) transports freight between Montreal and Vancouver. It also connects with hubs in the U.S. Midwest and Northeast. CP gets 25% of its revenue from the U.S. In 2010, CP got 28% of its revenue by hauling shipping containers that contain a variety of goods. Another 23% of its revenue came from hauling grain, followed by consumer and industrial products (19%), coal (10%), fertilizers (10%), automotive products (6%) and forest products (4%). CP’s revenue rose 16.7%, from $4.6 billion in 2006 to $5.3 billion in 2008, as increasing trade with Asia pushed up freight volumes. CP’s 2008 purchase of Dakota, Minnesota & Eastern Railroad Corp. (DM&E) for $1.5 billion also added to its revenue. DM&E operates a 4,000-kilometre rail network in eight midwestern states....

CP’s earnings have suffered lately, mainly due to bad weather. Avalanches during the winter disrupted its operations in western Canada, and spring floods washed out some of its lines in the Canadian Prairies and the U.S. Midwest. However, these are short-term setbacks. As well, the company is now working on a number of improvements that should make it more efficient, and push up its profits. CP’s upgrades mainly include improving its tracks and expanding its loading facilities so they can handle longer trains. That will extend the lives of CP’s locomotives, because they will have to make fewer stops and starts. These improvements will also help the company profit as shipping volumes rise....

CANADIAN PACIFIC RAILWAY LTD. $60.05 (Toronto symbol CP; Shares outstanding: 169.2 million; Market cap: $10.0 billion; TSINetwork Rating: Average; Dividend yield: 2.0%; www.cpr.ca) saw its earnings fall 23.2% in the three months ended June 30, 2011, to $128.0 million, or $0.75 a share. However, that beat the consensus estimate of $0.73 a share. A year earlier, the company earned $166.6 million, or $0.98 a share. The earnings drop was mainly caused by bad weather: flooding in the Canadian prairies and North Dakota caused nearly 90 service disruptions in the quarter. A 37% rise in fuel costs also weighed on its earnings. Even with the flooding, CP’s revenue rose 2.5%, to $1.26 billion from $1.23 billion....

CGI GROUP INC., $20.54, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. The company’s services can 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 the three months ended June 30, 2011, CGI earned $118.4 million. That’s up 37.9% from $85.9 million a year earlier. The company spent $56.9 million on share buybacks in the latest quarter. Due to fewer shares outstanding, earnings per share rose 43.3%, to $0.43 from $0.30. If you exclude a tax gain and other unusual items, CGI would have earned $0.38 a share in the latest quarter. That matched the consensus earnings estimate. Revenue rose 15.1%, to $1.04 billion from $901.6 million a year earlier. If you exclude the negative impact of exchange rates, revenue would have risen 18.0%. Canadian revenue fell 6.5%, due to delays in starting up new projects. However, U.S. revenue jumped 54.1%, mainly due to last year’s acquisition of Stanley Inc., which sells computer-outsourcing services to U.S. government agencies. Revenue at CGI’s European operations rose 27.4%....

CANADIAN PACIFIC RAILWAY LTD. $61 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 169.4 million; Market cap: $10.3 billion; Price-to-sales ratio: 2.1; Dividend yield: 2.0%; TSINetwork Rating: Above Average; www.cpr.ca) transports freight between Montreal and Vancouver. It also connects with major hubs in the U.S. Midwest and Northeast. In the three months ended March 31, 2011, CP’s earnings per share fell 66.7%, to $0.20 from $0.60 a year earlier. That’s mainly because a strike at Teck Resources Ltd. (Toronto symbol TCK.B) cut coal shipments (CP is Teck’s main railway). Bad winter weather in B.C. and a 28% jump in fuel prices also weighed on its earnings. CP’s revenue was unchanged at $1.2 billion. CP’s operating ratio worsened to 90.6% from 82.3% a year earlier. The company feels it can lower its operating ratio to around 70% in the next two to four years, mainly by increasing the speed and length of its trains. CP is also introducing new surcharges to help offset its higher fuel costs....

Canada’s two main railways face many unpredictable challenges, like bad weather and rising fuel costs. However, both have streamlined their operations. That helps them quickly respond to sudden setbacks. Both should continue to benefit as the improving economy pushes up freight volumes. We like both, but prefer CP for new buying. CANADIAN NATIONAL RAILWAY CO. $73 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 461.8 million; Market cap: $33.7 billion; Price-to-sales ratio: 4.1; Dividend yield: 1.8%; TSINetwork Rating: Above Average; www.cn.ca) operates Canada’s largest freight-rail network, and serves 16 U.S. states. Microsoft co-founder Bill Gates is CN’s largest shareholder, with just over 10% of the shares. In the three months ended March 31, 2011, CN earned $668 million. That’s up 30.7% from $511 million a year earlier. The company spent $340 million on share buybacks in the latest quarter. Because of fewer shares outstanding, earnings per share rose 34.3%, to, $1.45 from $1.08....

CANADIAN PACIFIC RAILWAY LTD. $62.57 (Toronto symbol CP; Shares outstanding: 169.4 million; Market cap: $10.6 billion; TSINetwork Rating: Average; Dividend yield: 1.7%; www.cpr.ca) reported that its earnings per share fell 66.7% in the three months ended March 31, 2011, to $0.20 from $0.60 a year earlier. Bad winter weather and a 10-week strike at major customer Teck Resources’ Elkview coal mine in B.C. hurt results. Still, profits should rebound now that these one-time events have passed. As well, CP is increasing the speed and length of its trains. The company is also introducing new surcharges to help offset its higher fuel costs....

PLEASE NOTE: Our next Hotline will go out on Friday, April 29, 2011. TECK RESOURCES LTD., $53.83, Toronto symbol TCK.B, rose 8% this week after the company reported better-than-expected first-quarter earnings. In the three months ended March 31, 2011, Teck’s earnings jumped 123.5%, to $0.76 a share from $0.34 a year earlier. These figures exclude several unusual items, such as gains on asset sales. On this basis, the latest earnings beat the consensus forecast of $0.75 a share. Revenue rose 24.9%, to $2.4 billion from $1.9 billion....

ENCANA CORP. $33.69 (Toronto symbol ECA; Shares outstanding: 735.3 million; Market cap: $24.9 billion; TSINetwork Rating: Average; Dividend yield: 2.4%; www.encana.com) is paying an undisclosed sum for a 30% stake in a proposed liquefied natural gas (LNG) terminal in Kitimat, B.C. Pipelines will pump gas from big new discoveries in the Horn River area of northeastern B.C. to the Kitimat terminal, which will then convert the gas into a liquid form. From there, tankers will ship the LNG to markets in Asia. Regulators must still approve the project, but exports could start in 2015. Encana is a buy....

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....