Cost Cuts Should Boost CP

Article Excerpt

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. buy…

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