Canadian Pacific Railway Ltd.

Canadian Pacific Railway Ltd. Q4 2017 EPS $3.22 vs. estimates of $3.20

Management Commentary

-“The fourth quarter was a record by almost every measure and should be celebrated by the men and women in the CP family who work hard every day to deliver for our customers and shareholders,” said Keith Creel, CP President and CEO.

-“2017 was a positive year where we continued to build the foundation for sustainable long-term growth by enhancing our service offering, strengthening our team of professional railroaders, and furthering strategic partnerships with customers.”

Financial Highlights

-Revenue up 5% to $1.71 billion from $1.64 billion.

-CP’s operating ratio fell to 56.1%.

-Adjusted EPS rose 6% to $3.22 form $3.04 a year ago.

-EPS up 159% from a year ago to $6.77, due to $527 million to account for deferred income tax recoveries from US tax reform.

-2018 management forecasts: single digit revenue growth and double digit adjusted EPS growth.

Key Metrics

-Dividend growth 5-year average: 10.05%.

-EPS growth 5-year average: 26.05%.

Recommendation: Hold

-CP rail’s stock is up 7.69% since my last earnings report.

-NAFTA renegotiations continue to progress and a withdrawal by the US would cause negative effects to CP’s business.

-CP rail, along with CN rail (I hold a position in CNR), should be viewed as core holdings with consistent stability and a quality dividend that continues to grow.

-With the passing of tax reform in the US, CP rail will see short term pain for long term gain due to the income tax recovery.

-Due to massive entry barriers of the railway business, CP rail should continue to receive interest from investors who look to add a unique business to their portfolio that one can hold forever.

Disclosure

I, Jared Flomen, do not own shares in Canadian Pacific Railway Ltd.

Please consult a financial advisor before making investment decision. This report represents my views, not actionable advice.

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