We are maintaining our Neutral recommendation on Canadian Pacific
Railway. The company remains focused on volume expansion,
operational efficiency, pricing revision and network capability
upgrade. We believe that strength in the Merchandize segment and
Canadian coal exports will lead to higher revenues and earnings in
the coming quarters. With the Industrial and Automotive segments
looking bright, we expect these to counterbalance the weak outlook
on the coal business. On the flip side, substitution of coal with
natural gas will continue to affect the company's coal shipments.
Canadian Pacific's global operations also face uncertainties with
labor issues, commodity risks related to the purchase of diesel
fuel, competition from other Canadian and U.S. firms and currency
fluctuations. We expect the company to perform at par with the
broader market in the coming months.
Canada and the U.S. The company owns approximately 10,700 miles
of track with an additional 4,700 miles jointly owned, leased or
operated under trackage rights. Of the total mileage operated,
approximately 6,200 miles are located in western Canada, 2,200
miles in eastern Canada, 5,800 miles in the United States Midwest
and 1,200 miles in the United States Northeast.
Canadian Pacific serves the principal business centers of Canada
from Montreal to Vancouver, as well as the U.S. Northeast and
Midwest regions. The company has extended its network reach by
establishing alliances and agreements with other Class I railways
in North America, which allows it to provide services and access
markets across North America beyond its own rail network. It also
serves markets in Europe and the Pacific Rim through direct access
to the Port of Montreal in Quebec, and the Port of Vancouver in
British Columbia, respectively.
Canadian Pacific derives revenues from Freight transport
(accounted for approximately 98% of 2013 total revenue) and Other
services (2%). Freight revenues are earned from transporting bulk,
merchandise and intermodal goods, and include fuel recoveries
billed to the customers. Freight segment consists of:
Grain, consisting mainly of durum, spring wheat, barley, canola,
flax, rye and oats, which are primarily transported to ports for
export and to Canadian and U.S. markets for domestic consumption.
The U.S. grain products mainly including durum, spring wheat, corn,
soybeans and barley are shipped from the Midwestern U.S. to other
points in the Midwest, the Pacific Northwest and Northeastern
Coal consists primarily of metallurgical coal transported from
southeastern British Columbia (BC) to the ports of Vancouver, BC
and Thunder Bay, Ontario, and to the U.S. Midwest. The Coal
business chiefly consists of transportation of thermal coal and
petroleum coke within the U.S. Midwest.
Sulfur and Fertilizers include potash, chemical fertilizers and
sulfur shipped mainly from western Canada to the ports of
Vancouver, BC, and Portland, Oregon, and to other Canadian and U.S.
Forest products include lumber, wood pulp, paper products and
panel transported from key producing areas in western Canada,
Ontario and Quebec to various destinations in North America.
Industrial and Consumer products include chemicals, plastics,
aggregates, steel, mine, ethanol, and other energy related products
(other than coal) shipped throughout North America.
Automotive consists primarily of the transportation of domestic,
imported and pre-owned vehicles as well as automotive parts from
North American assembly plants and from the Port Metro Vancouver to
destinations in Canada and the U.S.
Intermodal consists of domestic and international
(import-export) container traffic. The domestic business consists
primarily of retail goods moving in containers between eastern and
western Canada and to and from the U.S. The international business
handles containers of mainly retail goods between the ports of
Vancouver, Montreal, New York/New Jersey and Philadelphia and
inland Canadian and U.S. locations.
Other revenues are generated mainly from leasing of certain
assets, switching fees, routine land sales and income from business
Canadian Pacific Railway Limited (CP): Read the
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