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Canadian Pacific (CP) Strong on Freight Revenues & Dividends

Zacks

We recently issued an updated report on Canadian Pacific Railway Limited CP. The company is benefiting from an upbeat freight scenario. Its shareholder-friendly approach also bodes well.

In January 2019, this Canadian railroad operator reported better-than-expected earnings and revenues in the fourth quarter of 2018. Both the metrics also improved on a year-over-year basis. Robust freight revenues driven by strong demand aided results. In 2018, freight revenues have increased 12.2% year over year. The momentum is expected to continue in 2019 as well.

These apart, the company’s efforts to reward its investors through share buybacks and dividend payments are commendable. Over the last couple of years, Canadian Pacifichas increased its annual dividend by over 20%. In May 2018, the company raised its quarterly dividend per share by 15.5% to C$0.65 per share. It is also active on the buyback front.

Improvement in operating ratio is an added positive. In 2018, this key metric improved 30 basis points to 61.3%. Lower the value of the metric the better.


Canadian Pacific’s tentative four-year agreement with the union representing its mechanical employees (unifor), inked in December 2018, is also noteworthy. On the labor front, the company has received various encouraging updates so far this year. The agreements are huge positives as satisfied labor groups generally imply greater operational efficiency.

The Zacks Consensus Estimate for current-year earnings has climbed 1.1% over the past 60 days. The upward revision signifies the positivity surrounding the stock. Furthermore, this Zacks Rank #2 (Buy) stock has a Growth Score of B, which reflects its growth potential.

Other Stocks to Consider

Investors interested in the Zacks Transportation sector may also consider Atlas Air Worldwide Holdings AAWW, Avianca Holdings S.A. AVH and Radiant Logistics, Inc. RLGT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Atlas Air Worldwide, Avianca Holdings and Radiant Logistics have rallied more than 16%, 13% and 44%, respectively, on a year-to-date basis.

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