CP Rail shares climb as savings from job cuts seen

Wed Dec 5, 2012 11:54am EST
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* CP shares rise 4 pct on TSX

* Railway reducing assets, cutting 4,500 jobs

* CP executives detail efficiency plan in New York

TORONTO, Dec 5 (Reuters) - Shares of Canadian Pacific Railway pushed 4 percent higher on Wednesday, a day after the railroad announced a turnaround plan that includes sweeping job cuts that could save about C$500 million ($503 million) over the next four years.

The stock's rally extended a gain of nearly 30 percent it had made since hard-driving railway veteran Hunter Harrison was appointed chief executive in June after CP's largest shareholder, Pershing Square Capital Management Ltd, won a bruising proxy battle with the company's former management.

Harrison - who on Tuesday outlined key points in a plan that will eliminate about 23 percent of CP's jobs in four years - said his turnaround plan would allow Canada's second-largest railway to thin out its assets and use them more efficiently.

"We're going to reduce the number of assets required; we're going to do more with less. We're going to make those assets really sweat," Harrison told analysts in New York on Wednesday as the company spelled out details of the plan.

Analysts said the overhaul appears a credible strategy to revive the fortunes of CP, whose operating efficiency is the North American industry's worst.

"CP's targets are largely as expected and we believe that management and Hunter Harrison specifically have laid out a very credible plan," said National Bank Financial analyst Cameron Doerksen. "We also believe that CP's new management team fully backs Hunter Harrison's plan. Our issue with the stock continues to be valuation."   Continued...