lifts doubts on restructuring
Canadian Pacific Railway Team lifts doubts on restructuringAny doubt that the transformation underway at Canadian Pacific Railway is real was lifted this week after the railway delivered a operating performance in the first quarter despite harsh winter weather, pension headwinds, and difficult comparables, said Steve Hansen, Raymond James analyst, on Thursday.
"We had our doubts; but now we are convinced," Mr. Hansen said in a note to clients after the railway reported a 53% year over year increase in first quarter earnings on Wednesday.
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"While valuation might appear lofty vs. recent history, we believe that CP's new Dream Team, industry leading earnings growth, and untold long term opportunities make it easily digestible," he said.
Benoit Poirier, Desjardins Securities analyst, raised his price target to $125 a share, from $120 previously, after the first quarter results.
But with CP's shares closing at $124.73 on the Toronto Stock Exchange Wednesday, much of that upside is already priced in, he said. As a result, he held his hold rating on the stock.
Walter jumpman23 Spracklin, RBC Capital Markets analyst, agreed, and said the valuation has already exceeded the targets set by management.
"We believe that management targets, while ambitious, are achievable and our assumptions are within the target range forecasted by management," he said in a note. "However, at today valuations, the market is implying revenue and EPS growth that is well beyond management targets. With little room for error, we see the multiple as vulnerable."