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Canadian Pacific Hits 52-Week High: What's Driving the Rise?

Shares of Canadian Pacific Railway Limited CP have hit a 52-week high of $163 during the course of the trading session on Jul 3, before retracing a bit to close the session at $162.45. In fact, shares of this Calgary, Alberta, Canada-based railroad operator have performed very well in the last three months. The stock was up 8.3%, outperforming the Zacks categorized Transportation- Rail industry’s gain of 7.7%.

Catalysts Behind the Upsurge

The company’s efforts to reward shareholders through dividend payments and buybacks are very encouraging. Over the last couple of years, Canadian Pacific has increased its annual dividend over 20%. In May 2017, the company raised its quarterly dividend per share by 12.5% to C$0.5625 per share.The board cleared a new share buyback program as well.

The railroad operator expects earnings per share to grow in high-single digits in 2017, led by a projected increase in volumes and cost-control efforts. In fact, Canadian Pacific is working hard to bring down its operating ratio (operating expenses as a percentage of revenues on an adjusted basis). The measure, which came in at 61.3% in the first quarter of 2017, is now expected to improve by the rest of the year.

It is to be noted that the improvement in the coal related scenario has also aided this Zacks Rank #3 (Hold) company similar to its fellow railroad operator Canadian National Railway Company CNI.

Based on the above tailwinds, we expect Canadian Pacific to perform well in the second quarter of 2017, detailed results of which will be out on Jul 19. Our view is supported by the fact that the Zacks Consensus Estimate for earnings in the second quarter has climbed over 1% to $1.97 per share in the last month.

Additionally, Zacks Consensus Estimate for full-year 2017 earnings has moved up almost 1% to $8.59 per share in the same time frame. In fact, the bottom line is projected to expand 23.84% and 10.55% (year over year) in second-quarter and full-year 2017, respectively.

Notably, the company boasts earnings per share growth rate of 11% over the next five years. The figure compares favorably to the industry average of 10.5%. Furthermore, the company’s Momentum Style Score of ‘B’ highlights its short-term attractiveness and indicates when the timing is right to grab a stock, and make the most of its momentum.

Stocks to Consider

Better-ranked stocks in the railroad space include Kansas City Southern KSU and Norfolk Southern Corp. NSC 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 and Norfolk Southern have rallied over 20% and 7%, respectively, in the last three months.

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Kansas City Southern (KSU): Free Stock Analysis Report
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Canadian Pacific Railway Limited (CP): Free Stock Analysis Report
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