6 July 2009
CP Rail Loses Out on Arbitration Hearing
An empty Canadian Pacific unit coal train crosses the Stoney
Creek bridge eastbound - Date unknown John West
Teck Resources Ltd. came out as the winner of its
arbitration hearing with Canadian Pacific Railway Monday announcing it will save about $70-million in 2009, but the drop
in revenue has UBS taking a second look at CP Rail's earnings potential.
"The recently announced decision reduces CP's leverage to a potentially favourable outlook for coal.
We are revisiting our earnings and price target pending further information," Fadi Chamoun, UBS analyst, said in a note Monday.
Mr. Chamoun estimates revenue will take a hit of between $90-million and $107-million (-38 cents to -45
cents per share) as CP'S coal rate could drop as much as $6.50 per tonne.
UBS maintains its Buy rating and $50 price target, but that may change depending on whether or not CP can reduce costs in response to
the ruling.
Eric Lam.
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