28 June 2007
CN, CP Price Targets Raised
UBS is bullish on both Canadian National Railway CO. and Canadian
Pacific Railway Ltd. The firm's analysts rate CP Rail a "buy" and raised their price target to $85 from $81.
Efficiency gains, favourable pricing, volume growth, and better use of its balance sheet are some of the reasons cited for its
optimistic outlook.
UBS did lower its second quarter earnings per share forecast for CP Rail to US$1.10 from US$1.14. It made a similar move with CN Rail
last week, as did National Bank Financial on Thursday. However, its price target for CN Rail shares also moved up to $73 from $70.
CN Rail is highly leveraged to the North American economy, which is expected to recover in coming quarters, and the company should
benefit from the opening of a container terminal in Prince Rupert in the fourth quarter, UBS said in a note to clients.
The stock also trades at an 11% discount to its peers based on 2008 estimates, the firm added, calling CN Rail "one of the
highest quality industrial transportation companies in North America."
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