Shares of Canadian Pacific Railway Ltd (TSX: CP, NYSE: CP) fell 3.4 percent today on more than double the usual trading volume, due to news that activist investor Bill Ackman plans to reduce his stake in the railroad by 29 percent over the next six to 12 months.

In late 2011, Ackman, who helms the hedge fund Pershing Square Capital Management LP, shook up Canada’s clubby boardroom atmosphere when he began accumulating shares of the railroad. But speculation that Ackman was looking to sell the firm turned out to be unfounded. Instead, it appears that he intends to remain a long-term shareholder.

At the time, we noted that the relatively inefficient railroad nevertheless commanded a premium valuation compared to its North American peers. But Ackman sought to engineer a turnaround on this front, when he won a proxy battle that resulted in turnover in the executive suite as well as the boardroom.

Following this unceremonious ouster, Ackman installed gruff, veteran railroader E. Hunter Harrison as president and CEO. Harrison had previously helmed Canadian National Railway Co (TSX: CNR, NYSE: CNI), until his retirement in 2009.

At CN, Harrison famously slashed costs and drove productivity, making the railroad an industry leader. In a colorful interview late last year with The Globe and Mail, the Memphis, Tenn.-born Harrison described his new role at CP as similar to the one he played at CN:

“My story hasn’t changed,” he says. To rebuild what he calls the “spoiled, bad, horrible culture” at CP that suffered from “a total lack of leadership,” he is ripping up just about everything except for the railway’s tracks to shake off what he calls a “permissive” work ethic, a head office “where bureaucracy was king,” and a demoralized workforce at one of North America’s most inefficient railways.

“There is a new sheriff in town … He may be mean and ugly, but he knows about railroading and he is going to make this company successful.”

In those terms at least, Harrison’s tenure appears to have been successful thus far. CP’s operating ratio, an industry metric that quantifies efficiency by comparing operating expenses to revenue, was 81 percent in 2011, compared to 63.5 percent for CN. And in 2012, the operating ratio climbed to 83.3 percent versus an average of 71.7 percent among the largest North American carriers. But by first-quarter 2012, CP’s operating ratio had improved by 4.3 percentage points year over year, to 75.8 percent, thanks in part to job cuts, a fleet reduction, and rail yard closings.

CP also enjoyed its best first quarter in the company’s history, with total revenue of CAD1.5 billion, up 8.9 percent year over year, while profits jumped 52.8 percent, to CAD217 million.

Meanwhile, as CP’s largest shareholder, Ackman’s stake had grown to 13.8 percent of shares outstanding and swollen to 26 percent of his firm’s combined assets. With such a concentrated holding, it’s easy to understand why Ackman would be anxious to reduce his exposure to a single company. And having originally acquired his position at an average cost of USD55 per share, Ackman has already enjoyed an enviable return, even after today’s selloff.

But Ackman isn’t necessarily going anywhere. Even after his hedge fund unloads its shares, it will still hold 10 percent of shares outstanding. And Ackman will continue to serve on the board along with one of the partners at his hedge fund.

Further evidence of Ackman’s intent? Harrison says Ackman pushed him to start using a personal trainer, as well as Ackman’s own nutritionist. Harrison said that he lost 12 pounds in the first two weeks of this new regimen, which means Ackman is personally turning around the executive who’s engineering his investment’s turnaround.

On Bay Street, RBC Capital Markets analyst Walter Spracklin downgraded the stock to “underperform” because he believes that this news could tilt the mix of shareholders from momentum investors back to long-term buy and holders. Additionally, he says the share price has far exceeded fair value, as underscored by his 12-month price target for the stock of CAD104.

Among analysts overall, there are currently nine “buys,” 17 holds and five “sells.” The consensus 12-month price target is CAD131.81, which is essentially flat when compared to the current share price.

Shares of Canadian Pacific yield 1.1 percent and are down almost 6 percent from their 52-week high, which they hit on May 20. Although the stock is not currently a member of our Canadian Edge Portfolios, we do include it as part of our wider coverage universe, where it presently rates a “hold.”

The Roundup

After blowing past analysts’ estimates for sales and earnings per share (EPS) last quarter, Bird Construction Inc’s (TSX: BDT, OTC: BIRDF) first-quarter performance was decidedly lackluster. The firm narrowly missed top-line forecasts by 0.3 percent, but fell short on earnings per share (EPS) by 49.4 percent.

The small-cap general contractor’s first-quarter profit plunged 62.2 percent year over year, to CAD2.4 million, on construction revenue of CAD288.5 million, which was down a more moderate 2.1 percent over that same period.

Management attributed the difference to the “timing and mix of work” done versus the comparable period, as well as higher general and administrative expenses. The latter were up 15.4 percent from a year ago, and accounted for roughly half of the drop in EPS. But the news on this front is mostly positive: General and administrative expenses were higher due to an acquisition (detailed below) as well as increased staffing, both of which involve efforts to grow the company.

During the company’s earnings call, management also cited problems executing on a couple of projects as resulting in a higher cost of revenue, which pared gross margin by 1.34 percentage points, to 6.1 percent.

Management believes the firm’s diverse areas of expertise will enable it to endure the near- and medium-term headwinds. For instance, it sees continuing opportunities in the key industrial sector, particularly in 2014.

At the same time, the company currently has 139 projects under contract in the institutional sector, but management expects public spending to decline due to budgetary woes. Public-private partnership projects have been an important driver of growth, and the company will continue to compete for them, though it does not have the same edge in this arena as it does in industrial.

In mid-January, Bird completed its acquisition of Nason Contracting Group Ltd for CAD12.4 million in cash and stock. Nason constructs water and wastewater facilities and primarily operates in remote areas of Western Canada.

The company ended the quarter with CAD141 million in cash and cash equivalents on its balance sheet and just CAD32 million in long-term debt.

Among Bay Street analysts, Bird currently has two “buys,” five “holds,” and one “sell.” Last week, Raymond James analyst Frederic Bastien upgraded the stock to “outperform,” though his 12-month target price remained CAD14.

Despite the challenging operating environment, particularly in the mining sector, Bastien believes Bird trades at a compelling valuation and offers an enticing yield. Bastien’s upgrade coincided with the stock’s 52-week low, and its shares are up 8.4 percent since then.

The consensus 12-month target price is CAD13.21, which is 8.6 percent higher than where shares trade presently.

Though analysts expect full-year 2013 revenue and adjusted EPS to drop 13 percent and 44 percent year over year, respectively, the company should rebound next year. Analysts forecast 2014 revenue and adjusted EPS to jump 9 percent and 38 percent, respectively.    

Though still a long-term winner since we recommended the stock in late 2008, Bird is off nearly 26 percent from its 52-week high, which it hit in late January, and down almost 8 percent year to date.

The company’s shares started falling in late January following the announcement that it had lost a key contract in Canada’s oil sands. Nevertheless, Bird still had a project backlog of CAD1.03 billion at quarter end, including the CAD235 million in new contracts it secured during the quarter. Management expects to execute on CAD750 million of this backlog during the remainder of this year.

Shares of Bird’s stock currently yield 6 percent, and the dividend has grown almost 10 percent annually over the past five years. The firm boosted its payout 5.5 percent in February, for a current monthly payout of CAD0.0633. Bird Construction remains a buy under USD14.50.

Here’s when Portfolio Holdings will report numbers for the first quarter of 2013. Those that have revealed firm dates for announcements are noted as “confirmed,” while we provide an “estimate” for those yet to make specific commitments. Follow the links to read our analysis of those companies that have already reported.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–May Portfolio Update
• Artis REIT (TSX: AX-U, OTC: ARESF)–May 7 (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–June 4 Maple Leaf Memo
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–May 7 Maple Leaf Memo
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF)–May 8 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR, OTC: CDPYF)–May 7 (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–May 9 (confirmed)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–May 7 (confirmed)
• Dundee REIT (TSX: D-U, OTC: DRETF)–May 8 (confirmed)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–May 14 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–May 14 (confirmed)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–May 7 (confirmed)
• Northern Property REIT (TSX: NPR, OTC: NPRUF)–May 8 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–May 9 (confirmed)
• RioCan REIT (TSX: REI, OTC: RIOCF)–May 7 Maple Leaf Memo
• Shaw Communications Inc (TSX: SJR/A, NYSE: SJR)–May Portfolio Update
• Student Transportation Inc (TSX: STB, NSDQ: STB)–May 10 (confirmed)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–May Portfolio Update

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN OTC: ACAZF)–May 9 (confirmed)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–May 15 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–May Portfolio Update
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–May 14 Maple Leaf Memo
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–May 15 (confirmed)
• Colabor Group Inc (TSX: GCL, OTC: COLFF)–May Portfolio Update
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–May 9 (confirmed)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–May 10 (confirmed)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–May 9 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–May 17 Flash Alert
• Just Energy Group Inc (TSX: JE, NYSE: JE)–May 16 Flash Alert
• Newalta Corp (TSX: NAL, OTC: NWLTF)–May 7 Maple Leaf Memo
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–May 15 (confirmed)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–May 7, after the market’s close (confirmed)
• PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF)–May Portfolio Update
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–May 8 (confirmed)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–May Portfolio Update
• Wajax Corp (TSX: WJX, OTC: WJXFF)–May 10 (confirmed)