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Canadian Pacific (CP) Acquires Central Maine & Quebec Railway

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Canadian Pacific Railway Limited CP completed its previously announced (on Nov 20, 2019) acquisition of Central Maine & Quebec Railway (CMQ). However, the buyout is pending approval from the Surface Transportation Board in the United States.

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).

Prudent cost management owing to the precision scheduled railroading model is aiding Canadian Pacific to generate significant earnings growth. In fact, the company’s operating ratio (operating expenses as a percentage of revenues), a key measure of efficiency, has been improving over the last several quarters owing to its cost-control measures.

However, poor harvest weather in Canada and the U.S.-China trade dispute have exerted pressure on the company’s grain volumes. In fact, Canadian Pacific witnessed weak volumes in the fourth quarter due to macroeconomic headwinds and geopolitical tensions.

Zacks Rank & Key Picks

Canadian Pacific carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Transportation sector are Ryanair Holdings plc RYAAY, Allegiant Travel Company (ALGT - Free Report) and GATX Corporation GATX. While Ryanair sports a Zacks Rank #1 (Strong Buy), Allegiant and GATX carry a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

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