(The following report appeared on the National Post website on March 6.)
OTTAWA — Increased fuel cost and harsh winter weather are expected to drag on the earnings of the Canada’s largest railways in the first quarter, which had UBS analyst Fadi Chamoun lowering his earnings forecast Thursday for both Canadian National Railway Co. and Canadian Pacific Railway Ltd. for the first three months of 2008.
“With a full month of volumes data still to be released for [the first quarter], a strong March may help. However, it will unlikely be sufficient to narrow the [earnings per share] shortfall relative to UBS and consensus estimates,” he said in a note to clients.
Mr. Chamoun lowered his earning per share guidance for CN in the first three months of 2008 to 64¢ from 69¢ a share and his guidance for CP to 80¢ a share from 84¢ for the same period. He also dropped his price target by $1 for both railways to $65 and $79 for CN and CP, respectively.
“We believe that high economic risk and weak Q108 earnings will inhibit further share price appreciation in the near-term,” he said. However, Mr. Chamoun said he was maintaining his ‘buy’ rating on both railways, which is underpinned by robust fundamentals in the medium-to-long term, an economic recovery and accelerated growth in the latter half of the year and into the next.