Solid grain movement helps Canadian Pacific (CP) high debt
We recently published an updated report on Canadian Pacific Railway Limited CP.
We are impressed with the company’s efforts to reward its shareholders. To this end, the company increased its dividend by 15% to C $ 0.95 per share (C $ 3.8 per year) in July, mainly due to increased efficiency, thanks to the railroad model at fixed hours.
Canadian Pacific is doing brilliantly when it comes to grain transportation. To that end, the company set a record for the movement of Canadian grains and grain products in 2020. Last year, the rail operator moved 31.32 million metric tonnes (MMT) of grain. and Canadian grain products, more than any previous calendar year.
In the meantime, we are concerned about the high debt load of Canadian Pacific. The company had C $ 147 million in cash and cash equivalents, well below its debt (due within one year) of C $ 1,186 million at the end of the fourth quarter. This implies that the company does not have sufficient liquidity to meet its current debt obligations.
Zacks ranking and actions to take into account
Canadian Pacific currently holds a Zacks Rank # 3 (Hold).
Some higher ranked stocks in the larger Zacks Transportation sector are Kansas City Southern KSU, FedEx Corporation FDX and Herc Holdings Inc. HRI. Kansas City and FedEx carry a Zacks Rank # 2 (Buy), while Herc Holdings have a Zacks Rank # 1 (Strong Buy). You can see The full list of today’s Zacks # 1 Rank stocks here.
The expected long-term growth rate in earnings per share (three to five years) for Kansas City, FedEx and Herc Holdings is set at 15%, 12% and 31.2%, respectively.
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