CGI GROUP INC., $15.04, Toronto symbol GIB.A, is Canada’s largest provider of computer-outsourcing services. These services help its customers automate certain routine functions, such as accounting and buying supplies. That lets CGI’s clients focus on their main businesses, and improve their efficiency.
The company continues to renew existing contracts and win new ones. CGI added $1.1 billion of new orders in its second quarter, which ended March 31, 2010. Its backlog is now $11.4 billion, or 3.1 times its annual revenue.
Even with the jump in new orders, CGI’s revenue fell 4.0% in the latest quarter, to $910.4 million from $948.3 million a year earlier. CGI gets roughly 40% of its revenue from outside of Canada, mainly the U.S., so the higher Canadian dollar hurt its revenue. Without the negative impact of exchange rates, revenue would have risen 3.5%.
Earnings rose 6.5%, to $81.6 million from $76.6 million. However, per-share earnings rose 12.0%, to $0.28 from $0.25, on fewer shares outstanding. The latest earnings beat the consensus forecast of $0.27 a share.
CGI Group is our “Stock of the Year” for 2010. It’s a buy.
CANADIAN NATIONAL RAILWAY CO., $60.79, Toronto symbol CNR, fell 2% this week, even though it reported better-than-expected earnings.
In the three months ended March 31, 2010, CN’s earnings per share jumped 25.0%, to $0.80 from $0.64 a year earlier. These figures exclude several unusual items, mainly gains on the sales of two rail lines near Toronto. On that basis, the latest earnings beat the consensus estimate of $0.79 a share.
Revenue rose 5.7%, to $2.0 billion from $1.9 billion. Revenue from CN’s automotive group rose 48%, followed by coal (up 28%), consumer and industrial goods (up 10%), metals and minerals (up 6%), and grain and fertilizers (up 4%). These gains offset revenue declines from petroleum and chemicals (down 6%) and forest products (down 5%).
Like most railways, CN adds a surcharge to its fees when fuel costs rise. Oil prices have jumped 65% in the past year, so higher fuel surcharges contributed to the revenue gain. However, the company gets half of its revenue from freight it ships within the U.S. and across the Canadian border. The higher Canadian dollar hurt the contribution from these routes.
CN Rail is a buy.
CANADIAN PACIFIC RAILWAY LTD., $59.88, Toronto symbol CP, gained 4% this week. That’s because the improving North American economy is increasing demand for its rail services. The company has also cut its costs. That helped fuel a big rise in its earnings.
CP’s earnings jumped 74.2% in the three months ended March 31, 2010, to $99.8 million from $57.3 million a year earlier. Earnings per share rose 63.9%, to $0.59 from $0.36, on more shares outstanding.
If you exclude unusual items, including foreign-exchange losses on CP’s U.S.-dollar-denominated loans, earnings per share would have gained 87.5%, to $0.60 from $0.32. The latest earnings easily beat the consensus estimate of $0.51 a share.
CP’s revenue rose 5.2%, to $1.2 billion from $1.1 billion a year earlier. The company saw revenue gains from fertilizer (up 54.6%), automotive (up 49.5%) and consumer and industrial products (up 6.8%). These increases offset declines in grain (down 5.7%), coal (down 5.2%) and forest products (down 4.8%).
CP Rail is a buy.
TRANSALTA CORP., $20.90, Toronto symbol TA, uses coal-fired electrical plants to generate roughly 57% of its power. The company is working to cut its reliance on coal to comply with tougher environmental regulations that will likely come into effect over the next few years.
For example, this week TransAlta began talks with the State of Washington about cutting emissions at its coal-fired power plant in Centralia, Washington, over the next 15 years. To achieve this, the company will probably convert the plant to a cleaner fuel, such as natural gas.
Meanwhile, TransAlta’s earnings jumped 86.1% in the three months ended March 31, 2010, to $67 million. It earned $36 million a year earlier. Earnings per share rose 72.2%, to $0.31 from $0.18, on more shares outstanding. That beat the consensus estimate of $0.30 a share.
The company experienced fewer problems with its power plants in the latest quarter; its plants ran at 91.4% of capacity, up from 86.4% a year earlier. That was the main reason for the higher earnings. However, warmer-than-usual winter weather hurt average electricity prices in Alberta and Ontario. That caused a 4.4% revenue decline in the latest quarter, to $723 million from $756 million a year earlier.
TransAlta is a buy.
RIOCAN REAL ESTATE INVESTMENT TRUST, $19.40, Toronto symbol REI.UN, owns 261 retail properties in Canada, including 12 under development. It focuses on big-box outdoor malls (these malls feature large stores that are usually part of a chain).
In 2009, the trust formed a joint venture with Cedar Shopping Centers, Inc. (New York symbol CDR). Cedar owns shopping centres in the northeastern and mid-Atlantic regions of the U.S. The new joint venture holds six of Cedar’s malls in Massachusetts, Pennsylvania and Connecticut. It will buy a seventh mall later this year.
RioCan owns 80% of this joint venture. As part of the original deal, it also received common shares and warrants in Cedar. This week, RioCan exercised these warrants. It now owns about 14% of Cedar.
The trust paid $9.8 million U.S. for the extra Cedar shares. To put this amount in context, RioCan earned $37.5 million (Canadian) in the three months ended March 31, 2010. That’s up 22.2% from $30.7 million a year earlier.
Earnings per unit rose just 7.1%, to $0.15 from $0.14, on more units outstanding. Cash flow per unit rose 12.5%, to $0.36 from $0.32. That beat the consensus cash flow forecast of $0.34 a unit. The trust incurred higher interest costs during the quarter, but contributions from new acquisitions and gains on property sales helped offset these expenses.
RioCan is a buy.
Our next Hotline will go out on Friday, May 7, 2010.
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Privacy Policy and Terms of Use
The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
This privacy policy is applicable to all TSI Network Visitors, Clients, Employees, Suppliers, Web sites, Management, and all other interested parties. Any links to or from our site are not covered by this policy. We encourage you to read the privacy policies of every site that you visit.
The privacy of the site/store visitor is very important to TSI Network, and is respected at all times. The information we receive from customers helps us to personalize and continually improve your online experience at TSI Network.
We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
We store subscriber and password files containing personal information securely. These files are stored in secure areas that are not accessible to the general public. We are always working to ensure the security of your personal information.
We are continuously in the process of improving our sites and services. If any new features or policies require a change to this current policy, we will post a clear notice of this change on pages of our site where the privacy policy appears. The principle behind this privacy policy is to collect information with your knowledge and consent.
What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
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We do reserve the right, however, to collect and perform statistical analyses of the internet traffic to our website for our internal use. However, information collected does not allow us to identify any individual, and will not collect any personal information of the visitor. Furthermore, we do not sell, rent or loan to any outside parties the information collected and analyzed.
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Does TSI Network Use the Information It Receives?
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Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
We may disclose personal information you have provided through our websites, for the above purposes, to persons or companies that we retain to carry out and other activities for which you have registered or in which you have otherwise asked to participate. In particular, we may for these purposes transfer information to any country (including the USA and other countries which may not offer the same level of data protection as Canada). We also will disclose personal information if required by law, including compliance with warrants, subpoenas or other legal processes.
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TSI Network does everything possible to prevent unauthorized intrusion to its websites and the alteration, acquisition or misuse of personal information by unauthorized persons. Notably passwords submitted by users of our websites are encrypted using encryption mechanisms. However, TSI Network cautions visitors to its websites that no network, including the Internet, is entirely secure. Accordingly, we cannot be responsible for loss, corruption or unauthorized acquisition of personal information provided to our websites, or for any damages resulting from such loss, corruption or unauthorized acquisition.
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How can you ask questions about our Privacy Policy and access your personal information?
The provision of information by you is entirely voluntary and you have the right not to provide information. Subject to applicable law, you may have the right to receive certain information as to whether or not personal information relating to you is held by TSI Network and to obtain a copy of such information that is sought. You may also have the right to require information, where appropriate, to be erased, blocked or made anonymous or to have data updated or corrected. If you do not wish TSI Network to hold information about you or if you wish to have access to information, modify information, or object to any processing of information or if you have questions please contact us.
What Choices Do I Have?
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You can add or update certain information as explained in the section "How Can I Change My Information?"
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Changes to this Policy
This Policy is the sole authorized statement of TSI Network's practices with respect to the collection of personal information through TSI Network's websites and the subsequent use and disclosure of such information. Any summaries of this Policy generated by third party software or otherwise (for example, in connection with the "Platform for Privacy Preferences" or "P3P") shall have no legal effect, are in no way binding upon TSI Network, shall not be relied upon in substitute for this Policy, and neither supersede nor modify this Policy.
TSI Network may revise this Policy from time to time.
Legal Notices and Disclaimers
The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
Information presented on this web site or contained in our publications is not an offer, nor a solicitation, to buy or sell any securities referred to on the web site or in the publications. The material is general information intended for recipients who understand the risks associated with an investment in any securities referred to in the publications or on this web site. The Successful Investor has made no determination regarding whether an investment, course of action, or associated risks are suitable for the recipient.
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