NEW YORK (TheStreet) -- Canadian Pacific Railway (CP) stock closed lower by 5.79% to $104.82 in Wednesday's trading session, following CSX CEO Michael Ward's remarks that major railroad mergers don't necessarily generate compelling benefits.
In November, Canadian Pacific announced a $28 billion takeover offer for Norfolk Southern (NSC).
Norfolk Southern has rejected the railway's offers, which could ultimately result in a proxy battle.
"The benefits seem somewhat unconvincing, I really think the Class I railroads have great opportunities to create shareholder value without mergers," Ward told Reuters when asked about Canadian Pacific's unsolicited bid for Norfolk Southern.
"I think mergers could actually be destructive of shareholder value," he added, according to Reuters.
Separately, recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate CANADIAN PACIFIC RAILWAY LTD as a Buy with a ratings score of B-. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 9.7%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Road & Rail industry and the overall market, CANADIAN PACIFIC RAILWAY LTD's return on equity significantly exceeds that of both the industry average and the S&P 500.
- Net operating cash flow has increased to $696.00 million or 30.33% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -5.74%.
- 48.80% 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. Regardless of the strong results of the gross profit margin, the net profit margin of 18.89% trails the industry average.
- CANADIAN PACIFIC RAILWAY LTD's earnings per share declined by 11.7% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, CANADIAN PACIFIC RAILWAY LTD increased its bottom line by earning $8.49 versus $4.98 in the prior year. This year, the market expects an improvement in earnings ($10.20 versus $8.49).
- You can view the full analysis from the report here: CP