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Canadian Pacific to Purchase Central Maine & Quebec Railway

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Canadian Pacific Railway Limited (CP - Free Report) entered into a definitive agreement with Fortress Transportation and Infrastructure Investors LLC to acquire Central Maine & Quebec Railway ("CMQ"), a subsidiary of the latter.CMQ possesses 481 miles (774 kilometers) of rail lines mainly in Quebec and Maine.

Apart from strengthening the company’s presence in eastern United States, the buyout will enhance customer experience by providing a smooth, secure and efficient access to ports at Searsport, ME, and to Saint John, New Brunswick, via Eastern Maine Railway Company (EMRY) and New Brunswick Southern Railway (NBSR).

The transaction is expected to close by the end of this year, subject to customary closing conditions.

Prudent cost management owing to the precision scheduled railroading model is aiding Canadian Pacific to generate significant earnings growth. On the top-line front, the company is benefiting from impressive freight revenues at key units.

Backed by cost-cutting endeavors and higher revenues, the company’s operating ratio (operating expenses as a percentage of revenues) has been improving over the last several quarters. With these positives in place, Canadian Pacific expects double-digit earnings growth in 2019.

Zacks Rank & Key Picks

Canadian Pacific carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Kansas City Southern (KSU - Free Report) , Allegiant Travel Company (ALGT - Free Report) and Controladora Vuela Compania de Aviacion, S.A.B. de C.V. (VLRS - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Kansas City Southern, Allegiant Travel and Controladora Vuela have soared more than 59%, 68% and 100%, respectively, so far this year.

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