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As of April 26, 2016, FirstEnergy will no longer be providing research coverage on Canadian Pacific due to the steady decline of the energy industry’s portion of the railway business.
Companies: Canadian Pacific Kansas City Limited
Impact: Positive as most of CP’s performance metrics came in above FCC’s estimates. CP reported 1Q16 revenue of $1.59 billion (FCC: $1.57 billion) and posted a record low operating ratio of 58.9% (FCC: 59.6%). In terms of efficiency, CP reported terminal dwell times are down by 22% y/y and network speed up 21% y/y. The Board at CP has approved the repurchase of up to 6.91 million of its common shares and authorized a dividend increase of $0.15/share to $0.50/share each quarter or $2.00/y. With C
Impact: Positive as most of CP's performance metrics came in above FCC's estimates.
Though we were in favour of consolidation in the railroad industry and we believed the proposed CP-NS merger offered a viable solution to congestion in Chicago, IL, the time and effort spent on the controversial merger was becoming worrisome. CP realized that it needed to cut its losses and not extend itself on something that may never materialize.
On March 29, 2016, after market close, CP announced that it has filed a definitive proxy statement for its Norfolk Southern (NS) shareholder resolution requesting its Board of Directors to participate in discussions with CP regarding the combination of the two companies. CP has also announced that it is still open to discussions with the NS Board regarding an increase to the offer and the structure of a potential combination, not limited to a voting trust.
Year-to-date carloads are down 3.9% compared to 2015 due to significant declines experienced in crude, metals, minerals, consumer products and coal; we assume a similar decrease in revenue for the quarter. Our 1Q16e fully diluted adjusted EPS of $2.45/share was lowered from $2.57/share after adjusting for a higher compensation and benefits expense, though partially offset due to the $55 mm land sale of the Arbutus Corridor. EPS guidance remains at double digit growth for FY2016. Due to commodity
Canadian Pacific announced on February 16, 2016, that it would seek a declaratory order from the U.S. Surface Transportation Board (STB) on CP's proposed voting trust model for its merger with Norfolk Southern (NSC-N, no research coverage), in response to shareholder wishes, despite continuing to believe that "this action is unnecessary".
On February 9, 2016, CP announced its intent to submit a resolution to Norfolk Southern's (NS) shareholders to request that the NS board engage in good faith discussion with CP regarding the proposed combination of CP and NS. CP's decision to abandon the proxy battle for NS' board and submit a resolution to initiate further merger discussions can be viewed as positive as it allows CP to gauge support of the combination among NS shareholders. This option is a cheap way to gain a better understand
On February 3, 2016, CP released a white paper outlining the merits of the voting trust structure it has proposed to allow it to combine with the Norfolk Southern Railway prior to a final merger approval, and provided background around the U.S. Surface Transportation Board (STB) and its intentions. CP believes that the proposed combination with Norfolk Southern Corp (NS) has ample precedence for approval. CP also
believes that the combination will enhance competition and provide public benefit,
CP has replaced Paul Hilal with Matthew H. Paull on its Board of Directors effective immediately. Mr. Paull has experience in senior financial roles, most recently holding the position of Senior Executive Vice President and Chief Financial Officer of McDonald's Corp., which will enable him to chair the Board of Directors' Audit Committee at CP. Mr. Paull serves on multiple other Boards in various capacities and we expect he will provide CP shareholders with a fresh perspective and access to his
The impact is negative as CP’s adjusted EPS of $2.72 were below FCC and consensus estimates of $2.76. The 4Q15 earnings presentation notes that terminal dwell times are down by 19% y/y and network speed is up 18% y/y, showing that operations continue to improve. Due to a historic lack of carload growth in most segments, we have dramatically redefined our revenue growth expectations for CP over the next five years. Management guided towards FY2016 realizing an operating ratio sub 59%, double-dig
Impact: Negative as CP's adjusted EPS of $2.72 were below FCC and consensus estimates of $2.76.
On January 20, 2016, CP released a white paper that provides further analysis on the proposed merger of CP and Norfolk Southern Corp. (NS), including its views on the benefit from the combination that could be provided to customers and competition through an improved Chicago rail hub. If the merger takes place, CP would use the expanded CP-NS network to shift traffic to alternate routes around Chicago, perform interchanges at locations outside the city, and implement operational improvements in
On January 14, 2016, CP responded to comments made by Union Pacific (UP) CEO Lance Fritz regarding his disapproval of the combination between CP and Norfolk Southern, and his comment that UP is rallying other Class 1 railroad companies to oppose the merger. CP continues to believe that the merger will create more competition and relieve congestion around Chicago, benefitting all railroads.
On January 12, 2016, CP released a white paper to explain its thesis that the railroad industry needs change to meet future transportation demands. The release states that the status quo will limit North American prosperity, and that the industry essentially has two options: adding infrastructure and building more track or increasing efficiency of the overall network without adding more infrastructure. CP believes the latter is the solution to accommodate future economic growth and may only be a
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Oxford Metrics’ results for the year to 30 September show a business that is growing strongly, driven by long-term technology, economic and demographic trends across the life sciences, entertainment and engineering markets. The results are in line with the trading update given on 25 October (see our note) that showed revenue and adjusted PBT ahead of our, and market, expectations. With a confident management commentary on the outlook, we raise our estimates for FY24E and introduce forecasts for
Companies: Oxford Metrics PLC
Progressive Equity Research
ITM has released a trading update, providing guidance on its upcoming H1 FY 2024 results, and reiterating full year FY 2024 guidance.
Companies: ITM Power PLC
Water Intelligence has reported a strong 10m Trading Update that indicates it is on track to meet expectations and we increase our FY23 estimates by +2%.
Companies: Water Intelligence plc
Norcros’s compelling investment case was underpinned at the half year where underlying operating profit was down less than 3% despite material revenue pressure. Group operating margins rose 60bp, the UK business reported record underlying profits and Norcros continued to take market share in both the UK and South Africa. We believe that Norcros’s key strengths are underappreciated and that legacy issues, notably the pension deficit, have been resolved. We retain our estimates and value the share
Companies: Norcros plc
Companies: CPX DSCV GHH IOM SOLI IXI
WATR's 10-month update published this morning reflects continuing momentum in the business, in particular pushing margins ahead while also continuing to invest for growth. WATR is a supplier of in-demand water leak detection and related services across the whole of the US, with rarity / uniqueness in being a nationwide provider of these services, while also playing in international markets including the UK, Australia and Canada. The company has typically generated double-digit CAGR over the pa
discoverIE has reported an encouraging H1 2024 showing a resilient sales performance (flat in total, +4% CER) against strong comparators (+23% CER last year) in a difficult macro environment and an impressive increase in operating margins from 11.5% to 12.9%. Underlying EPS increased +8% and gearing of 1.6x is at the lower end of the target range. There remains significant opportunity for acquisitions, which – alongside targeting continued margin increases – provides upside potential to our fore
Companies: discoverIE Group PLC
Companies: Titon Holdings Plc
Companies: PNRL AYM RIO THR WSBN GMET TGR
The front of this note takes a look at the UK oil and gas sector, why domestic production is advantageous, what the main political parties think, and what could happen going forward. The latter part contains a review of the companies in our coverage – some that are UK centric, which give exposure to the note’s wider theme, and others that are focused elsewhere.
Companies: TLOU PTAL HTG ENW ITM BLVN RKH HBR UJO GMS JOG MATD CEG GENL AXL
The recommended offer announced today for Velocys comes from a consortium consisting of Lightrock, Carbon Direct Capital, GenZero and Kibo Investments. At 0.25p this values Velocys at £4.1m on a fully diluted basis. Following the acquisition, the consortium will provide up to US$40m of funding to help Velocys achieve it’s medium-term growth plans as well as providing a £3.5m bridging loan until the acquisition is effective. We remain of the view that the offer is cheap relative to the long-term
Companies: Velocys plc
Longspur Clean Energy
TClarke has confirmed it is on track to deliver its three-year growth-plan target of £500m of revenues in 2023E (up from £426m in 2022). It detailed a 99% increase in the order book to £1.1bn alongside a further £1bn in opportunities. Reflecting the current challenges in the construction sector, management has made a number of strategic decisions to preserve the business’s strong market and financial position. These include changing some supply-chain partners mid-contract to protect project comp
Companies: TClarke plc
Oxford Metrics (OM) today announced the acquisition of Industrial Vision Systems Ltd (IVS) for £8.1m, funded from cash and 1m new shares. IVS operates in industrial applications of smart sensing, with machine learning technology for quality control in the manufacturing environment. The deal is immediately earnings enhancing and we are raising our forecasts for FY24. This is an exciting first M&A application of the funds from the Yotta disposal. The deal appears technologically and strategically
SDI Group has announced the acquisition of Peak Sensors, a UK manufacturer of temperature sensors, for an estimated £2.4m (£2.3m less cash). The initial cash consideration is £1.58m, with a further c.£0.82m payment due shortly after completion. The deal will be funded from SDI’s revolving credit facility. As at 30 September, SDI had c.£1.78m cash, £15.1m bank debt and £9.9m undrawn bank facility excluding the accordion, providing considerable financial flexibility for the group. The acquisition
Companies: SDI Group plc
After years of slippage, Rolls Royce may have finally found the bottom. H1 23 was marked by a 28% organic increase in revenues, a 531bp increase in operating margin and a sharp increase in cash generation, thanks to a higher activity level and the initial benefits of the multi-year transformation plan. Following these strong results, the company has upgraded its FY23 outlook.
Companies: Rolls-Royce Holdings plc