UBS: Expect Weak Q1 Earnings from CN and CP Rail

Increased fuel cost and harsh winter weather are expected to drag on the earnings of the Canada’s largest railways in the first quarter, which had UBS analyst Fadi Chamoun lowering his earnings forecast Thursday for both Canadian National Railway Co. (CNI) and Canadian Pacific Railway Ltd. (CP) for the first three months of 2008.

In a note to clients he said:

With a full month of volumes data still to be released for [the first quarter], a strong March may help. However, it will unlikely be sufficient to narrow the [earnings per share] shortfall relative to UBS and consensus estimates.

Mr. Chamoun lowered his earning per share guidance for CN in the first three months of 2008 to C$0.64 from C$0.69 a share, and his guidance for CP to C$0.80 a share from C$0.84 for the same period. He also dropped his price target by C$1 for both railways to C$65 and C$79 for CN and CP, respectively.

“We believe that high economic risk and weak Q108 earnings will inhibit further share price appreciation in the near-term,” he said. However, Mr. Chamoun said he was maintaining his ‘buy’ rating on both railways, which is underpinned by robust fundamentals in the medium-to-long term, an economic recovery and accelerated growth in the latter half of the year and into the next.

Comments

[onelittlesa...:]

Long after the CP Rail profits have been tallied and totalled, citizens of Canada and USA will have a serious mess on their hands. Poisoned watersheds, devastated salmon and fish habitat, diminishing wildlife stocks - thanks to CP Rail. On the scale of ethical investments - CP Rail rates a zero. Check out the shocking YOUTUBE series -- CP RAIL KILLER CULVERT. Watch it and weep - while CP enjoys record profits. People -- It's time to start thinking about the future of North America. Act responsibly!

2008 Mar 10 06:24 PM