price to sales ratio

CANADIAN PACIFIC RAILWAY LTD. $97 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 173.0 million; Market cap: $16.8 billion; Price-to-sales ratio: 3.0; Dividend yield: 1.4%; TSINetwork Rating: Above Average; www.cpr.ca) plans to cut 25% of its workforce as part of a major restructuring plan aimed at improving its efficiency. CP is also increasing the length and speed of its trains. The plan should cut CP’s operating ratio from 74.1% in the third quarter of 2012 to 65% in 2016. (Operating ratio is calculated by dividing regular operating costs by revenue—the lower, the better.)

In addition, CP has suspended its plan to build new rail lines that would have served coal mines in Montana and Wyoming. That’s because power plants are switching to cheaper natural gas, which has hurt demand for coal. As a result, CP will take a $180-million charge. That’s equal to 80% of the $224 million, or $1.30 a share, that it earned in the third quarter.

CP Rail was our #1 buy for 2012. It’s still a buy.

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ATCO LTD. (Toronto symbols ACO.X [class I non-voting] $77 and ACO.Y [class II voting] $77; Income Portfolio, Utilities sector; Shares outstanding: 57.5 million; Market cap: $4.4 billion; Price-to-sales ratio: 1.0; Dividend yield: 1.7%; TSINetwork Rating: Above Average; www.atco.com) gets two-thirds of its earnings from its 52.8% stake in Canadian Utilities (see page 1).

Most of the remainder comes from ATCO Structures & Logistics, which builds temporary buildings for construction companies and energy exploration firms. ATCO owns 75.5% of this business, while Canadian Utilities owns 24.5%. Another subsidiary, ATCO I-Tek, manages computer networks, billing and payment processing for a wide variety of businesses.

ATCO’s revenue rose 12.5%, from $2.9 billion in 2007 to $3.3 billion in 2008, but fell 4.8%, to $3.1 billion, in 2009. Revenue improved to $3.5 billion in 2010, and to $4.0 billion in 2011.

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CANADIAN UTILITIES LTD. (Toronto symbols CU [class A non-voting] $68 and CU.X [class B voting] $68; Income Portfolio, Utilities sector; Shares outstanding: 128.1 million; Market cap: $8.7 billion; Price-to-sales ratio: 2.7; Dividend yield: 2.6%; TSINetwork Rating: Above Average; www.canadianutilities.com) distributes electricity and natural gas in Alberta. It also operates 18 power plants in Canada, Australia and the U.K. ATCO Ltd. (see page 2) owns 52.8% of Canadian Utilities.

The company’s power plants supply around 60% of its earnings, followed by gas distribution (30%) and other businesses (10%). It gets 90% of its earnings from Canada.

Canadian Utilities’ revenue rose 15.6%, from $2.4 billion in 2007 to $2.8 billion in 2008. However, lower power rates for its unregulated plants in Alberta cut its revenue by 7.0%, to $2.6 billion, in 2009. Revenue rebounded by 4.5% in 2010, to $2.7 billion, after it started up a new power plant in Australia.

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Dear client,

The best way for conservative investors to profit from cyclical oil and natural gas prices is with well-established leaders like Chevron. That’s partly because its large international presence cuts its exposure to any one region.

Chevron also offers investors a growth element....

FEDEX CORP. $93 (New York symbol FDX; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 314.1 million; Market cap: $29.2 billion; Price-to-sales ratio: 0.7; Dividend yield: 0.6%; TSI Network Rating: Average; www.fedex.com) reported that its earnings in the three months ended November 30, 2012 fell 11.9%, to $438 million, or $1.39 a share....

Airlines continue to upgrade their fleets with more fuel-efficient aircraft. That will continue to improve these two aerospace firms’long-term prospects. Rising airliner demand should also help them offset a potential decline in military sales as governments cut defense spending to deal with their budget deficits.

UNITED TECHNOLOGIES CORP....

GENERAL ELECTRIC CO. $21 (New York symbol GE; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 10.5 billion; Market cap: $220.5 billion; Price-to-sales ratio: 1.6; Dividend yield: 3.6%; TSINetwork Rating: Above Average; www.ge.com) is benefiting from its recent purchases of companies that supply equipment to oil and natural gas producers....

A good way to diversify your Finance holdings is with smaller firms that are leaders in their niche markets, such as these two. Their well-established brands should keep fuelling their growth, which will give them more cash for dividends. (Note: We include Fair Isaac- — see page 5— in the Manufacturing and Industry sector because it serves a wide range of clients besides banks and other lenders.)

T....

ENCANA CORP. $20 (New York symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 736.3 million; Market cap: $16.2 billion; Price-to-sales ratio: 2.5; Dividend yield: 3.6%; TSINetwork Rating: Average; www.encana.com) has formed a joint venture with PetroChina International Investment Company Ltd., which is controlled by the Chinese government, to develop its Duvernay property in central Alberta....

WESTERN UNION CO. $14 (New York symbol WU; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 596.6 million; Market cap: $8.4 billion; Price-to-sales ratio: 1.4; Dividend yield: 3.8%; TSINetwork Rating: Above Average; www.westernunion.com) provides money-transfer and foreign-exchange services in over 200 countries.

In the three months ended September 30, 2012, the company’s earnings rose 12.4%, to $269.5 million from $239.7 million a year earlier....