Morning Minutes

Railroad Bidding War and Earnings In The Spotlight



Takeover news in the railroad sector is topping the headlines this morning on both sides of the border. Canadian National Railway announced a hostile takeover bid for Kansas City Southern, bidding $325 per share, including $200 million in cash. This tops, so far, a previous friendly takeover offer from Canadian Pacific of $275 per share, including $90 million in cash, in an attempt to forge the first railway to link all three USMCA partner countries.

In US premarket trading this morning, Kansas City Southern is up 16.6% trading near $300, or about halfway between the two bid prices. Canadian National is down 6.2% in premarket action while Canadian Pacific is up 2.3%. This action suggests that at this point, investors think a higher bid to be unlikely (or they would have bid up the shares higher), and have started to reassign some of the pricing related to transaction and integration risk toward Canadian National and away from Canadian Pacific.

In other news, earnings season continues this morning with a number of reports out of senior US companies. Results which beat expectations include: Johnson & Johnson ($2.59 vs street $2.34), Procter & Gamble ($1.26 vs street $1.19), IBM ($1.77 vs street $1.63), and Travelers ($2.73 vs street $2.37). Companies who missed include United Airlines (-$7.50 vs street -$7.08) and Xerox ($0.22 vs street $0.30). Results from Netflix and railroad CSX are due after the close today.

Broad market indices have been sliding overnight. US index futures are down 0.2%-0.4% this morning, adding to yesterday’s losses of 0.3% to 1.0%. The Dax and FTSE are down 0.9% to 1.0% this morning. Bitcoin appears to be stabilizing near 1.60%. Commodities are climbing this morning with WTI crude oil and copper both up 0.6%.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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