Cost Cuts & Expansion Lift CP’s Profit

Article Excerpt

CANADIAN PACIFIC RAILWAY LTD. $64 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 155.5 million; Market cap: $10.0 billion; SI Rating: Above average) is starting to enjoy the benefits of a recent expansion of its network in Western Canada. In the three months ended December 31, 2006, profits grew 7.5%, to $1.15 a share from $1.07 a year earlier. These figures exclude unusual items and foreign exchange losses. Revenue rose just 1.7%, to $1.19 billion from $1.17 billion, as lower coal shipments offset higher grain and fertilizer volumes. The company is also doing a good job of cutting its costs. Its operating ratio (regular operating expenses divided by revenue — the lower, the better) fell to 73.1% in the latest quarter from 73.9% a year earlier. A plan to increase locomotive speed and cut waiting times in rail yards should help improve CP’s efficiency in 2007. The recent weakening in the Canadian dollar should also help raise…