Dahlman Rose Gives Color on Canadian Pacific Railway As Weather Is Expected To Weigh On Shares

Weather and fuel are expected to slash Canadian Pacific Railway's CP 1Q11 EPS to a range of C$0.12 to C$0.22. But with most of the weather issues likely behind, outlook for the remainder of the year should remain relatively intact. Risk to other carriers' earnings is lower as CP's QTD volumes are in line/better than expectations. Canadian Pacific's total 1Q11 volumes are down 5% QTD. While all Class I's were impacted to some degree by the quarter's unusually harsh winter weather, Canadian Pacific is the only one to see its traffic decline y/y. Therefore, Dahlman is less concerned about the earnings results of the remaining railroads in its coverage universe. Given weather and fuel, Dahlman is lowering its 1Q11 EPS estimate to $0.19 from our prior estimate of $0.69. Dahlman's 2011 EPS estimate decreases to C$3.85 from our prior estimate of C$4.35. Dahlman continues to believe that Canadian Pacific has favorable long-term prospects, but it remains on the sidelines while it tries to gain more price visibility and monitor the company's operational progress. Dahlman Rose has a Hold rating on CP CP closed Monday at $65.75