CANADIAN PACIFIC RAILWAY LTD. $113 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 173.9 million; Market cap: $19.7 billion; Price-to-sales ratio: 3.5; Dividend yield: 1.2%; TSINetwork Rating: Above Average; www.cpr.ca) is improving its efficiency with new locomotives and software that optimizes train loads and speeds.
CP’s earnings fell 15.1% in 2012, to $484 million, or $2.79 a share. In 2011, the company earned $570 million, or $3.34 a share. However, if you disregard costs related to CP’s recently announced plan to cut 25% of its workforce, as well as writedowns of locomotives and other assets, its earnings per share would have risen 37.8%, to $4.34 from $3.15. Revenue rose 10.0%, to $5.7 billion from $5.2 billion.
The company’s operating ratio worsened to 83.3% from 81.3% a year ago. However, its restructuring should cut this figure to around 70% in 2013.
CP’s improved efficiency should raise this year’s earnings (without unusual items) by at least 40%, to $6.08 a share. The stock trades at 18.6 times that figure. That’s still reasonable in light of CP’s improving profitability, iconic brand and extensive landholdings. The $1.40 dividend yields 1.2%.
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