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Stock of the Week: CP Rail

Why the strike wasn’t meant to last.

Andrew Willis 28 March, 2022 | 4:08AM
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Andrew Willis: One day after the work stoppage at CP Rail (CP), Morningstar Equity Analyst Matthew Young signalled that he didn’t think the strike as going to last for long. And why that is bodes well for the workers, but also for the company’s economic moat.

It may not come as a surprise then that the stoppage ended the day after Young’s prediction. We are still very much dealing with inflation and supply chain issues today – and shippers have already been vocal about how a potential strike could make the situation much worse. And think about the freight: grain, fertilizer, coal…we’re too dependent for any downtime.

Sufficed to say, the impact on consumers and the economy likely caught the attention of the federal government and we suspect mediators were pushing hard for a resolution. The other option was back-to-work legislation, but that would have taken up precious time while it worked its way through parliament.

The workers union here had some bargaining power - with the help of CP Rail’s competitive advantage. How do you quickly replace the cost efficiency and scale of a railroad that’s so heavily tied to the economy? Investors might be better off worrying about the economy itself.

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Canadian Pacific Railway Ltd97.82 CAD2.27Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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