Why Canadian Pacific Railway (CP) Is Up Today

NEW YORK (TheStreet) -- Canadian Pacific Railway  (CP) was rising 7.63% to $152.68 shortly after noon on Wednesday after Canada's second-largest railway announced that its profits had increased five-fold in the fourth quarter, while freight revenue increased 7%.

Net profit increased to $82 million Canadian, or 47 Canadian cents per share, in the quarter that ended Dec. 31, compared to C$15 million, or eight Canadian cents a share, in the same period one year earlier. Revenue rose 7% to C$1.6 billion. The company reported that it expects adjusted earnings per share to increase at least 30% and revenue to increase 6% to 7% in 2014 compared to 2013.

The railway also announced that it earned C$1.91 per share, excluding a pre-tax asset impairment charge and other one-time items. This fell just under the C$1.95 expected by analysts polled by Thomson Reuters I/B/E/S.

TheStreet Ratings team rates CANADIAN PACIFIC RAILWAY LTD as a "buy" with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate CANADIAN PACIFIC RAILWAY LTD (CP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, compelling growth in net income and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CP's revenue growth has slightly outpaced the industry average of 5.4%. Since the same quarter one year prior, revenues slightly increased by 5.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • 43.22% is the gross profit margin for CANADIAN PACIFIC RAILWAY LTD which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 21.12% is above that of the industry average.
  • Net operating cash flow has significantly increased by 51.80% to $504.00 million when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 7.54%.
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Road & Rail industry. The net income increased by 44.6% when compared to the same quarter one year prior, rising from $224.00 million to $324.00 million.
  • Powered by its strong earnings growth of 41.53% and other important driving factors, this stock has surged by 33.25% over the past year, outperforming the rise in the S&P 500 Index during the same period. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
  • You can view the full analysis from the report here: CP Ratings Report

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