cp rail

CP’s shares soared to a high of $90 in July 2007. They have since fallen 60%, to $36. The stock was probably overpriced at $90 and 21 times earnings. But it now trades at 9.1 times this year’s forecast earnings, and it yields 2.8%. This well-established company is a mainstay of the Canadian economy. It’s a rare low-risk treat to be able to buy it at today’s bargain level. 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....

CANADIAN PACIFIC RAILWAY LTD. $38.30 (Toronto symbol CP; Shares outstanding: 153.8 million; Market cap: $5.9 billion; SI Rating: Average) earned $178 million, or $1.15 a share before one-time items in the three months ended December 31, 2008, down 3.8% from $185 million, or $1.20 a share, a year earlier. The drop in earnings was largely caused by higher fuel and labour costs. Revenue, however, rose 8.3%, to $1.3 billion from $1.2 billion as higher rates offset lower freight volumes. CP plans to issue up to 13.9 million new common shares at $36.75 each. The proceeds of $510.8 million will help CP cover its pension costs, which will rise from $95 million in 2008 to between $150 million and $195 million in 2009. In 2010, CP estimates its pension obligations will continue to climb, to between $295 million and $345 million....

CANADIAN PACIFIC RAILWAY LTD. $39 (Toronto symbol CP, Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 153.8 million; Market cap: $6.0 billion; Price-to-sales ratio: 1.2; SI Rating: Above average) is down 48.0% from $75.00 in May, 2008 on fears that falling prices for coal and agricultural products will hurt its earnings....

Many of our recommendations have dropped sharply in the past few months, along with the overall market. Here are 10 stocks that we feel have strong rebound potential in 2009. CANADIAN IMPERIAL BANK OF COMMERCE $49 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 380.8 million; Market cap: $18.7 billion; Price-to-sales ratio: 1.5; SI Rating: Above average) is down 37.6% from its recent peak of $78.48 in May, 2008. That’s mainly because it has the most exposure to the problems in the U.S. mortgage market among the big five Canadian banks. CIBC has taken substantial writedowns in the past year, which should cover most of the damage. It also continues to expand its retail banking operations, as well as scale back its riskier operations. CIBC is a buy....

CANADIAN PACIFIC RAILWAY LTD., $37.22, Toronto symbol CP, earned $631.5 million in 2008, down 6.1% from $672.8 million in 2007. Per-share earnings fell 6.0%, to $4.06 from $4.32. These figures exclude foreign-exchange losses and other one-time items. The drop was largely caused by higher fuel and labour costs. Revenue, however, rose 4.8%, to $4.9 billion from $4.7 billion as higher rates offset lower freight volumes. CP’s operating ratio rose to 78.6% from 75.3% a year earlier. (Operating ratio is calculated by dividing a company’s regular operating costs by its revenue. The lower the ratio, the better.) Falling oil prices and temporary layoffs should help lower CP’s costs in 2009. The company plans to issue up to 13.9 million new common shares at $36.75 each. The gross proceeds of $510.8 million will help CP cover its pension costs, which will rise from $95 million in 2008 to between $150 million and $195 million in 2009. In 2010, CP estimates its pension obligations will continue to climb, to between $295 million and $345 million. To conserve cash, the company plans to cut capital spending by $200 million in 2009....

CANADIAN PACIFIC RAILWAY LTD. $44 (Toronto symbol CP; Shares outstanding: 153.8 million; Market cap: $6.8 billion; SI Rating: Average) transports freight over a rail network between Montreal and Vancouver. In the United States, subsidiaries connect CP Rail’s Canadian lines to major hubs in the Midwest and Northeast. Alliances with other railways extend its reach to Mexico. In the three months ended September 30, 2008, CP Rail’s earnings per share excluding one-time items fell 2.4%, to $1.20 from $1.23. Like most railways, CP Rail uses surcharges to offset higher fuel costs. This pushed up revenue by 6.5%, to $1.3 billion from $1.2 billion. CP Rail’s fuel costs rose 49% in the third quarter. Consequently, its operating ratio (regular operating costs divided by revenue — the lower, the better) weakened to 76.0% from 72.9% a year earlier. However, falling oil prices and a new productivity improvement plan should help CP Rail cut its costs. The rising U.S. dollar is a plus for the company, as it pushes up the contribution of its U.S. operations....

CP Rail is down over 50% from the high of $90 it reached in 2007. Earnings were $4.32 a share that year and the stock yielded just 1.2%. The stock was probably overpriced at $90 and 20.8 times earnings, but it now trades at less than 10 times this year’s forecast earnings and has a yield of 2.3%. The stock could go lower, but we think the company will undoubtedly survive the economic downturn. Eventually CP will go on back to $90 and beyond. CANADIAN PACIFIC RAILWAY LTD. $44 (Toronto symbol CP; Shares outstanding: 153.8 million; Market cap: $6.8 billion; SI Rating: Average) transports freight over a rail network between Montreal and Vancouver. In the United States, subsidiaries connect CP Rail’s Canadian lines to major hubs in the Midwest and Northeast. Alliances with other railways extend its reach to Mexico. In the three months ended September 30, 2008, CP Rail’s earnings per share excluding one-time items fell 2.4%, to $1.20 from $1.23. Like most railways, CP Rail uses surcharges to offset higher fuel costs. This pushed up revenue by 6.5%, to $1.3 billion from $1.2 billion....

CANADIAN PACIFIC RAILWAY LTD. $51.90 (Toronto symbol CP; Shares outstanding: 153.8 million; Market cap: $8.0 billion; SI Rating: Average) reports that in the three months ended September 30, 2008, earnings per share excluding one-time items fell 2.4%, to $1.20 from $1.23. Like most railways, CP uses special surcharges to offset its higher fuel costs. Thanks mainly to these surcharges, revenue grew 6.5%, to $1.3 billion from $1.2 billion. CP’s fuel costs rose 49% in the third quarter. Consequently, its operating ratio (regular operating costs divided by revenue — the lower, the better) weakened to 76.0% from 72.9% a year earlier. However, falling oil prices and the benefits of a new productivity improvement plan should help CP cut its costs in fourth quarter. CP Rail is still a safety-conscious buy.

TERANET INCOME FUND $9.50, Toronto symbol TF.UN, has received a new takeover offer from the Ontario Municipal Employees Retirement System (OMERS). The new offer of $10.25 a unit is 6.8% less than the previous offer of $11.00. Teranet’s units are now trading for roughly 7% below the new offer. The lower offer reflects a slowing economy in Ontario and falling real estate values. That could hurt demand for Teranet’s electronic land registry services. As well, it’s increasingly difficult to secure loans for corporate takeovers. Teranet recommended that investors accept the first OMERS offer, after it failed to attract other bidders. Teranet has not yet commented on the new offer of $10.25 a unit. However, it’s still unlikely that a new bidder will emerge. As well, Teranet’s second-largest shareholder has accepted the new offer....

CANADIAN PACIFIC RAILWAY LTD. $65 (Toronto symbol CP; SI Rating: Average) transports freight over a rail network between Montreal and Vancouver. In the United States, subsidiaries connect CP’s Canadian lines to major hubs in the Midwest and Northeast. Alliances with other railways extend its reach to Mexico. In the three months ended June 30, 2008, CP’s revenue was unchanged at $1.2 billion. The lower U.S. dollar and lower shipments of automobiles and forest products slowed revenue growth. Earnings before one-time items fell 13.4%, to $0.97 a share from $1.12. CP’s profits dropped, despite steady revenues, partly from costs related to the U.S. Midwest flooding, but mostly due to higher fuel costs. However, by the end this year, CP expects to have provisions in all of its contracts to let it pass on fuel price increases. It also aims to improve long-term efficiency with several new initiatives, including sharing more tracks with other railways, as well as better scheduling....