Canadian Pacific Railway Limited (USA) (CP) — The premier rail company provides freight transportation over a network of 14,700 miles that span Canada and the Midwest and Northeast United States.
On Oct. 21, Canadian Pacific Railway reported third-quarter adjusted earnings per share (EPS) rose 24% year over year to approximately $0.96 U.S., beating the Zacks consensus estimate of $0.92.
Operating EPS did miss S&P Capital IQ’s estimates. While its analysts lowered their full-year 2014 guidance by a penny to $8.45, they raised their 2015 estimate by $0.36 to $10.82. They also reiterated their “buy” rating and raised their 12-month price target by $13 to $243.
Despite the continuing headwinds of wages and pensions, Capital IQ analysts said they believe increasing traffic and improving asset utilization will lead to wider margins.
The chart is telling us that CP stock is worthy of higher prices. Note the high-volume breakout from a consolidation that ended in March. Shares sprang from $150 to over $220 in six months while in a narrow bull channel.
Following its high in early October, CP stock succumbed to profit-taking along with other rail companies. Shares fell to a low of $180.13 on Oct. 15. But the recovery was rapid as they stabilized around their 50-day moving average at $203.
With slight selling pressure, CP stock could pull back to $203. Traders should try to buy it at this level with a target of $220. Investors should put CP stock on their buy list with a 12-month target of $243.
