cp rail
PLEASE NOTE: Our next Hotline will go out on Friday, July 9, 2010. GENNUM CORP., $6.60, Toronto symbol GND, earned $4.1 million, or $0.12 a share (all amounts except share price in U.S. dollars) in the three months ended May 31, 2010. That’s a big improvement over the $1.1 million, or $0.03 a share, it lost a year earlier. Gennum makes chips and other electronic equipment that lets television broadcasters store, edit and transfer video signals without losing picture quality. It also makes chips that improve the flow of data inside computer networks....
CANADIAN PACIFIC RAILWAY LTD. $58.16 (Toronto symbol CP; Shares outstanding: 168.6 million; Market cap: $9.8 billion; SI Rating: Average; Dividend yield: 1.9%) has raised its quarterly dividend by 9.1%, to $0.27 a share from $0.2475. The new annual rate of $1.08 a share yields 1.9%. The company also added $70 million to its 2010 capital spending plans. It will now spend $750 million to $800 million on upgrades, including improving tracks and buying new trains. That’s up from $724.1 million in 2009. The higher spending will help CP take advantage of rising demand for the goods it ships, such as automobiles and fertilizers. CP Rail is a buy.
The Greek bailout and the poor financial state of major countries rattled the market again this week. Everybody agrees that high government debt and deficit spending are serious problems that must be fixed, but opinions differ about urgency. The biggest pessimists see government debt-and-deficits as terminal conditions that are too far advanced to be reversed. Others see the debt-deficit as more akin to a serious case of high blood pressure – a risk factor, not a death sentence. My view is that a combination of budget cuts, economic growth and a dash of inflation may be enough to gradually unwind the debt-and-deficits problem over a period of years if not decades....
CANADIAN PACIFIC RAILWAY LTD. $57.42 (Toronto symbol CP; Shares outstanding: 168.5 million; Market cap: $9.7 billion; SI Rating: Average; Dividend yield: 1.7%) reports that its earnings per share jumped 87.5%, to $0.60 from $0.32, in the three months ended March 31, 2010. These figures exclude one-time items. The improving North American economy is increasing demand for CP’s rail services. The company has also cut its costs. That helped fuel the big rise in its earnings. CP’s revenue rose 5.2%, to $1.2 billion from $1.1 billion a year earlier. Revenue gains from fertilizer, automotive and consumer and industrial products offset declines in grain, coal and forest products....
CGI GROUP INC., $15.04, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. These 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. The company continues to renew existing contracts and win new ones. CGI added $1.1 billion of new orders in its second quarter, which ended March 31, 2010. Its backlog is now $11.4 billion, or 3.1 times its annual revenue. Even with the jump in new orders, CGI’s revenue fell 4.0% in the latest quarter, to $910.4 million from $948.3 million a year earlier. CGI gets roughly 40% of its revenue from outside of Canada, mainly the U.S., so the higher Canadian dollar hurt its revenue. Without the negative impact of exchange rates, revenue would have risen 3.5%....
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....