23 December 2008
CP Rail's Q4 Earnings Under Pressure
Expect weaker earnings than originally anticipated, when
Canadian Pacific Railway Ltd. reports fourth quarter results in the new year, says RBC Capital analyst Walter Spracklin.
Mr. Spracklin reduced his Q4 earnings estimated by 19 cents per share to $1.01 based on several negative factors, including a
retroactive adjustment to grain revenues, three derailments during the quarter that are expected to increase casualty expenses, and a
coal mine shutdown.
His 2009 EPS estimate is unchanged at $4.18.
"Management indicated that Elk Valley mines are winding down production with a full shutdown scheduled from
23 Dec 2008 to 5 Jan 2009," the analyst told clients in a note, adding that Elk Valley, owned by Teck
Cominco Ltd., is a "substantial and high margin representing 13% of CP's revenue.
He said the mine shutdown will impact CP Rail's EPS by 3 cents in the quarter.
The impact on earnings of the retroactive adjustment to its grain revenue cap is 10 cents, while the derailments will cost the
railroad 6 cents per share.
Mr. Spracklin maintained his "sector perform" rating and left his $54 price target unchanged.
|
