CANADIAN PACIFIC RAILWAY LTD. $132 (Toronto symbol CP; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 174.7 million; Market cap: $23.1 billion; Price-to-sales ratio: 4.0; Dividend yield: 1.1%; TSINetwork Rating: Above Average; www.cpr.ca) continues to benefit from a major restructuring plan, which includes new locomotives, better tracks and software that optimizes train loads and speeds.
In the first three months of 2013, CP’s earnings jumped 52.8%, to $217 million, or $1.24 a share. A year earlier, the company earned $142 million, or $0.82 a share.
The higher earnings are mainly due to CP’s improving efficiency. Its operating ratio improved to 75.8% from 80.1% a year ago. The company aims to cut its operating ratio to 65% by the middle of 2016.
Revenue rose 8.6%, to $1.5 billion from $1.4 billion. CP saw revenue gains from shipping consumer and industrial products (up 24.8%), fertilizers (up 20.6%), grain (up 9.0%), coal (up 8.8%) and forest products (up 6.0%). That offset declines in automotive products (down 7.6%) and intermodal (down 4.2%).
The stock has gained 91.3% since we made it our top pick for 2012. CP trades at 21.4 times its likely 2013 earnings of $6.18 a share. That’s still a reasonable p/e ratio in light of its improving profitability, iconic brand and extensive landholdings. The $1.40 dividend yields 1.1%.
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