Should You Stay Away From Hudson’s Bay Co. and Canadian National Railway After a CEO Reshuffle?

Hudson’s Bay Co. (TSX:HBC) and Canadian National Railway (TSX:CNR)(NYSE:CNI) could be taken in new directions in 2018.

| More on:
think, plan, and act to work towards your financial goals

A company in transition has the potential to scare away investors due to uncertainty, but it can also provide opportunity for savvy investors. Take the case of BlackBerry Ltd., a company that has seen its stock soar since the hiring of turnaround specialist John Chen as its CEO. BlackBerry has successfully transitioned into the software and services industry and is one of the few Canadian companies with a footprint in the rapidly expanding autonomous vehicle industry.

Today, we are going to look at two companies that have recently seen CEOs depart amid internal turmoil. The stocks have suffered in the aftermath of both departures. Should you add either one to your portfolio?

Hudson’s Bay Co. (TSX:HBC)

Hudson’s Bay is a Brampton-based retail company. Shares of Hudson’s Bay have plunged 16.4% in 2018 as of close on March 6. The stock is down 20% year over year. The company entered a period of uncertainty in 2017 when an activist investor began to push leadership to begin monetizing its real estate holdings. Successive earnings have proven disappointing for its retail business — it posted a $243 million third-quarter loss in December 2017.

CEO Jerry Storch announced his departure in late October. Storch was a veteran in the retail business who had been skeptical about reducing the company’s brick-and-mortar footprint, as it could become a “slippery slope.” Hudson’s Bay followed up his resignation with the announcement that it would sell its flagship Lord & Taylor building in Manhattan for $1 billion.

In early February, Hudson’s Bay announced that Helena Foulkes, formerly of CVS Health Corp., would become CEO on February 19. Governor and executive chairman Richard Baker said the company was drawn to Foulkes because of her reputation as a transformational leader. In February, Hudson’s Bay also rejected a multi-billion offer for its Kaufhof unit, the largest retail chain in Germany.

Canadian National Railway (TSX:CNR)(NYSE:CNI)

CNR is a Montreal-based transportation company. Shares of CNR are down 8.1% in 2018 thus far and 1.1% year over year. On March 5, the company announced that CEO Luc Jobin would step down, as CNR struggled to keep up with higher demand of late. Leadership has said that the company is looking for a replacement that will “energize” the company.

In its 2017 fourth-quarter and full-year results, CNR saw net income rise 51% for the full year to $5.48 billion. Revenues rose 8% to $13.04 billion, and its free cash flow increased to $2.77 billion compared to $2.52 billion in 2016. The company raised its cash dividend by 10% to $0.46 per share, representing a 1.9% dividend yield.

Former CEO Luc Jobin blamed “challenging operating conditions” and “harsh early winter across the network” for impacting the company’s performance in 2017. Early Canadian dollar weakness in 2018 could also boost CNR if the trend persists.

Should you stay away from both stocks?

A lower Canadian dollar could provide early momentum for CNR. The stock also offers a solid dividend for investors seeking income. Hudson’s Bay, however, is facing an increasingly difficult retail environment, and slower retail sales to finish 2017 does not bode well.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. David Gardner owns shares of Canadian National Railway. The Motley Fool owns shares of BlackBerry and Canadian National Railway. BlackBerry and Canadian National Railway are recommendations of Stock Advisor Canada.

More on Investing

stock analysis

Buy the Dip: 2 Stocks to Buy Today and Hold for the Next 5 Years

These Canadian stocks are trading at discounted valuations, providing an opportunity for buying the dip.

Read more »

bulb idea thinking

Safety in Size? 2 of the Bluest Blue-Chip Stocks I’d Buy Now

TC Energy (TSX:TRP) and another cash cow have huge dividend yields for safe investors.

Read more »

A cannabis plant grows.
Cannabis Stocks

Can Aurora Cannabis Stock Recover in 2024?

Aurora Cannabis stock is down 99% from all-time highs but remains a high-risk bet, despite its cheap valuation.

Read more »

Question marks in a pile
Dividend Stocks

Where Will Brookfield Infrastructure Partners Stock Be in 5 Years?

Brookfield Infrastructure Partners (TSX:BIP.UN) kicked off 2024 with a bang. Where will it be in five years?

Read more »

TFSA and coins

TFSA Investors: 3 Incredible Stocks for 2024

Are you looking for stocks to buy and hold for years for your TFSA? These three stocks could deliver exceptional…

Read more »

A person looks at data on a screen
Stocks for Beginners

3 Warren Buffett Stocks to Hold Forever

Warren Buffett sold some shares in Apple (NASDAQ:AAPL), and the market had questions.

Read more »

Dividend Stocks

Golden Years Gain: Your CPP Benefits at Age 70

CPP users delaying pension payments until 70 will receive substantial monthly income streams in the golden years.

Read more »

data analytics, chart and graph icons with female hands typing on laptop in background
Dividend Stocks

3 Dividend Stocks You Can Safely Hold for Decades

Top TSX dividend stocks are on sale.

Read more »