Here's Why Canadian Pacific Deserves a Place in Your Portfolio

Shares of Canadian Pacific Railway Limited CP have been displaying an uptrend despite the prevalent pandemic-ravaged scenario. The stock has rallied 19.5% in the past three months compared with the 14.6% increase of its industry.

Let’s look into the factors that are working in favor of this currently Zacks Rank #2 (Buy) stock.

Northward Earnings Estimates: The Zacks Consensus Estimate for current-quarter earnings has been revised 10% upward over the past 60 days. For 2020, the consensus mark for the metric has moved 8.2% north in the same time frame. The favorable estimate revisions reflect the confidence of brokers in the stock.

Given the wealth of information at their disposal, it is in the best interest of investors to be guided by a broker’s advice and the direction of their estimate revisions. This is because the same serves as a key indicator in determining the price of a stock.

Impressive Earnings Growth: The Zacks Consensus Estimate for current-year earnings is pegged at $13.01 per share, indicating a 5% rise from the year-ago reported figure. Similarly, the consensus mark for 2021 earnings stands at $14.5 per share, implying an 11.4% rise from the prior-year estimate.

Upbeat Grain Movement & Low Costs: The company is being aided by low operating costs, courtesy of the precision scheduled railroading model, which improved its efficiencies. Notably, operating expenses declined 11.5% year over year in the June quarter. Operating ratio (operating expenses as a percentage of revenues) also improved in the period despite dismal revenues owing to low costs. The precision scheduled railroading model should continue supporting the bottom line by declining operating expenses. The record Canadian grain movement in the June quarter drove results too.

Bullish Industry Rank: The industry, to which Canadian Pacific belongs, currently has a Zacks Industry Rank of 101 (of 250 plus groups). Such a solid rank places the company in the top 40% of the Zacks industries. Studies show that 50% of a stock price movement is directly tied to the performance of the industry group that it hails from.

In fact, an average stock in a strong group is likely to outperform a robust stock in a weak industry. Therefore, taking the industry’s performance into consideration becomes imperative.

Other Stocks to Consider

Investors interested in the Zacks Transportation sector may also check out some other stocks worth considering like Landstar System LSTR, Knight-Swift Transportation Holdings KNX  and United Parcel Service UPS, each sporting a Zacks Rank #1 ( Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Shares of Landstar System, Knight-Swift and UPS have rallied more than 16%, 14% and 65%, respectively, in the past three months.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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