One of the leading Canadian railroads,
Canadian Pacific Railway Limited
(
CP
) has announced the resignation of its board member Tony Ingram,
who belonged to the old management team led by former chief
executive officer (CEO), Fred Green.
Following the resignation of president and CEO Fred Green and
chairman John Cleghorn, Canadian Pacific registered a series of
management changes. These include stepping down of old board
members from the new management team formed under the direction of
William Ackman.
Following the annual general meeting on May 17, the company
announced the names of the 16 directors including William Ackman,
one of the major stake holders in Canadian Pacific and the key
person to stir organizational changes succeeded in appointing
Hunter Harrison as the new CEO of the company. Hunter Harrison
formerly served as the CEO of
Canadian National Railway
(
CNI
).
Given the managment changes in Canadian Pacific, we believe the
railroad's fight with its eminent investor, Ackman has finally
reached a settlement. In January, Ackman, who owns approximately
12% stakes in Canadian Pacific proposed a plan to replace CEO Fred
Green with Hunter Harrison, former CEO of rival Canadian National
(CNI). Ackman's policy to bring improvements in Canadian Pacific
beginning with a change in CEO was however, previously condemned by
the board of directors.
Management stated that under the directions Fred Green the company
has been working towards successful execution of it Multi-Year Plan
that endorses volume growth, network expansion and costs control
measures, driving operating ratio in low 70s in next three years.
On the basis of these growth goals the company has so far realized
significant synergies, as evident by the improvement in operating
ratio compared to 2010 results despite a slowing economy. On
continued implementation of the long-term plan, management expects
further improvements in Canadian Pacific's financial performance.
However, we believe that the resignation of Fred Green and changes
in the board reflect the faith of the shareholders on Ackman for
turning around the fate of the company.
The second quarter Zacks estimate for the stock is pegged at 93
cents with a year over year growth rate of 30.52%. For fiscal 2012
and 2013, the Zacks estimates remains at $4.40 and $5.35 with a
year over year growth rate of 41.01% and 21.57%, respectively.
Consequently, we have a Neutral recommendation on Canadian Pacific.
For the short term (1-3 months), the company has a Zacks #3 Rank
(Hold).
CDN NATL RY CO (CNI): Free Stock Analysis
Report
CDN PAC RLWY (CP): Free Stock Analysis Report
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