Canadian Pacific Railway Co. , long seen as a laggard compared to the likes of Canadian National Railway , is going to be in focus on Wednesday morning following a credit rating downgrade. Standard & Poor's cut its rating on the company on to BBB- from BBB, putting the railway's long-term bonds just one notch above junk status.
"The downgrade primarily reflects the company's slower pace of deleveraging relative to our previous expectations," said Standard & Poor's credit analyst Madhav Hari in a statement. "In addition, CP's operating and credit-protection measures are noticeably weak compared with those of other North American Class 1 railroad peers."
S&P's outlook on CP had been "negative" since late 2007, so the downgrade might not come as a shock to investors who have become used to seeing the railway lag its rivals. While CN's share price remains close to its 52-week high, CP's has fallen 14 per cent.
The good news? With the downgrade, S&P says that the outlook on CP is now "stable." As well, the lagging share price might attract some bargain hunters looking for a little engine that could... but hasn't yet.
David Berman