Canadian Pacific Railway (CP)
Canadian Pacific Railway (CP) is one of the two major Class I railroads in Canada, with 14,700 miles of track and infrastructure stretching from Vancouver to Montreal and into the Midwest and Northeast U.S.
CP reported a quarterly EPS of $1.96 on Thursday, a whopping 48% above the same quarter last year. CP’s revenue hit $1.56 billion — a 12% rise compared to the same quarter a year ago. Not surprisingly, CP benefited substantially from the fracking boom as crude oil shipments climbed 18%.
The growth in movement of crude oil and petrochemical products by rail has prompted a thorough review of safety measures — particularly after several high-profile derailments, but railroads, oil companies and federal transportation officials are developing stricter procedures and stronger tank cars to minimize the impact of freight rail accidents.
CP earnings were also boosted by a bumper crop of North American wheat. In the aftermath of a tough winter, CP has struggled to move a bumper crop of wheat from western Canada. More recently, though, the backloads have narrowed and the shipments are getting back on track.
CP has a PEG ratio of 1.03, indicating that the stock is valued about right — but its forward P/E of nearly 18 is a bit higher than that of its peers. The nominal current dividend yield of 0.7% is nothing to write home about, but the stock has gained almost 30% so far this year. CP’s margins have been improving as the railroad implements a more focused cost-cutting strategy. Further investments in infrastructure — and more rugged tank cars for oil and flammable liquids transport — will pay off in the future.
As of this writing, Susan J. Aluise did not hold a position in any of the aforementioned securities.