cp rail

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....

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....

CANADIAN PACIFIC RAILWAY LTD., $47.90, Toronto symbol CP, reported higher profits for its latest quarter, as a gain on the sale of an investment helped it overcome a 24% drop in freight volumes caused by the recession. In the three months ended June 30, 2009, CP’s earnings rose 1.7%, to $157.3 million from $154.7 million a year earlier. Earnings per share fell 7.0%, to $0.93 from $1.00, on more outstanding shares. (In February, CP sold 13.9 million shares at $36.75 each. That increased the total outstanding by about 9%). The latest earnings included a $68.7-million gain on CP’s sale of part of its stake in the Detroit River Tunnel Partnership, which operates a rail tunnel between Detroit and Windsor, Ontario. CP now owns 16.5% of this business, down from 50%. The sale freed up cash that CP used to pay down debt, while preserving its right to keep operating the tunnel. CP’s $4-billion long-term debt is now a manageable 49% of its $8.2 billion market cap....

The recession continues to drive down railway volumes and stock prices. However, both CN and CP have been cutting costs, which will help them increase their profits once the economy starts growing again. As well, both recently made acquisitions in the U.S. that should fuel their growth. CANADIAN NATIONAL RAILWAY CO. $45 (Toronto symbol CNR; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 468.4 million; Market cap: $21.1 billion; Price-to-sales ratio: 2.5; SI Rating: Above Average) operates the largest freight-rail network in Canada. It also serves 16 U.S. states. In the three months ended March 31, 2009, CN’s revenue fell 3.5%, to $1.86 billion from $1.93 billion a year earlier. The recession cut freight volumes, and CN lowered its fuel surcharges in response to the drop in oil prices. Earnings rose 0.7%, to $302 million from $300 million. Earnings per share rose 3.2%, to $0.64 from $0.62, on fewer outstanding shares. These figures exclude several one-time items, including a gain on the sale of a Toronto rail line and expenses related to CN’s recent takeover of a Chicago-area railway. Still, the company benefitted from a lower income-tax rate and a weaker Canadian dollar, which increased the contribution of its American operations....

CANADIAN PACIFIC RAILWAY LTD. $40 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 168 million; Market cap: $6.7 billion; Price-to-sales ratio: 1.4; SI Rating: Above Average) ships freight over a rail network between Montreal and Vancouver. It also operates in the midwestern and northeastern United States. CP’s first-quarter earnings fell 31.1%, to $62.5 million, or $0.39 a share, from $90.7 million, or $0.59 a share, a year earlier. If you exclude foreign-exchange gains and losses, per-share earnings fell 54.7%, to $0.34 from $0.75. Revenue fell just 6.6%, to $1.07 billion from $1.15 billion. However, that was mostly because CP bought a railway that operates in eight U.S. states last October. Without this, CP’s revenue would have fallen 13%. The company is stepping up its cost cutting in response to weak shipping volumes. This includes laying off 2,400 workers, or 16% of its workforce. CP has also put more trains into storage....

TECK RESOURCES LTD. $18 (Toronto symbol TCK.B; Conservative Growth Portfolio, Resources sector; Shares outstanding: 486.9 million; Market cap: $8.8 billion; Price-to-sales ratio: 1.2; SI Rating: Extra Risk) will see its coal-shipping costs fall by $70 million this year following a favourable arbitration ruling over CP Rail. The two companies could not agree to a new contract, so Teck opted for arbitration. To put these savings in context, Teck earned $227 million, or $0.47 a share, in the first quarter of 2009. Separately, Teck has reached a new deal with CN Rail that will see CN ship more of Teck’s coal. Being able to use both CP and CN should help Teck improve its efficiency. Teck Resources is a buy.

CANADIAN PACIFIC RAILWAY LTD. $37 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 167.7 million; Market cap: $6.2 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) has agreed to sell most of its stake in a 50-50 partnership that owns the railway tunnel between Windsor, Ontario and Detroit. The sale will cut CP’s interest from 50% to 16.5%. With the sale, the Ontario Municipal Employees Retirement System, CP’s partner in the tunnel, will increase its stake to 83.5%. CP will receive $110 million. This is equal to 17% of its 2008 earnings of $631.5 million, or $4.06 a share. It may also receive an extra $22 million, depending on how much freight moves through the tunnel in the future. The sale will help CP pay down its $4.7-billion long-term debt and cope with the recession. CP Rail is a buy.

PETRO-CANADA, $34.68, Toronto symbol PCA, jumped 17% this week after it accepted a friendly takeover offer from Suncor Energy Inc. ($29.36, Toronto symbol SU). (Suncor is not related to Philadelphia-based refiner Sunoco Inc., New York symbol SUN.) Under the terms of the deal, Petro-Canada shareholders will get 1.28 common shares of Suncor for each share they own, while Suncor investors will get one share of the new company for each Suncor share they own. Suncor shareholders will own 60% of the combined company, which will be Canada’s largest oil company in terms of market cap. Petro-Canada shareholders will own the remaining 40%. The combined company will operate under the Suncor name. However, the new company will keep using the Petro-Canada banner for its retail gas stations (Petro-Canada has 1,300 stations, while Suncor has roughly 300 that operate under the “Sunoco” banner). It will have proven oil reserves of 3.1 billion barrels, compared to 2.3 billion barrels for Imperial Oil (see below)....

CANADIAN PACIFIC RAILWAY LTD. $36 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 167.7 million; Market cap: $6 billion; Price-to-sales ratio: 1.2; SI Rating: Above Average) ships freight over a 25,000-kilometre rail network between Montreal and Vancouver. In the United States, its subsidiaries connect its Canadian lines to major hubs in the midwest and northeast. Alliances with other railways extend CP’s reach to Mexico. CP made 29% of its 2008 revenues hauling shipping containers loaded with a variety of goods. Grain accounted for 20% of its revenues, followed by industrial products (16%), coal (13%), fertilizers (10%), automotive products (7%) and forest products (5%). CP’s many revenue sources cut its reliance on any single commodity or industry. Thanks largely to expanding trade with Asia, CP’s revenue rose 20.6%, from $3.9 billion in 2004 to $4.7 billion in 2007. Earnings rose 87.1%, from $359.5 million in 2004 to $672.8 million in 2007. Earnings per share rose 91.2%, from $2.26 to $4.32 on fewer shares outstanding....