Earnings from CN Rail, CGI and Starbucks are drawing attention as investors look beyond short-term results and focus on long-term opportunities.
BNN Bloomberg spoke with Martin Cobb, senior vice-president, equities at Lorne Steinberg Wealth Management, who discussed positioning in railways, software and consumer stocks amid evolving valuations and growth expectations.
Key Takeaways
- Railways remain attractive long-term holdings given their role in economic growth and trade despite short-term share price volatility.
- CN Rail valuations have declined from previous highs, creating opportunities for investors focused on multi-year returns.
- CGI faces pressure around its competitive moat as AI and software trends reshape the IT services landscape.
- Constellation Software is favoured for its acquisition-driven growth model and stronger long-term earnings compounding potential.
- Starbucks turnaround efforts are gaining traction, though margin recovery and growth prospects remain below historical peaks.
Read the full transcript below:
ANDREW: Both U.S. and Canadian earnings are pouring in this week, and we have some Canadian companies to focus on today, CN Rail and the Montreal-based IT services provider CGI. Let’s get more from Martin Cobb, senior vice-president, equities at Lorne Steinberg Wealth Management. Sorry, Martin, thank you very much. You’re not Lawrence, you’re Martin. Thanks for joining again.
MARTIN: Morning, Andy.
ANDREW: Good morning. CN Rail, give us your thoughts. Are you long railway stocks generally? Anything jump out for you with these numbers?
MARTIN: Yes, we are. We own both CN Rail and CPKC. Now, if I could choose between just looking at quarterly numbers for all companies or looking at anything else, I would firmly choose the latter, the anything. What can you glean from 13 weeks for a company that has 20,000 miles of track and 100,000 cars moving all over? So I don’t pay too much attention to it, but I like the rails today because they’ve been around for 100 years. They’ll be around for another 100 years. They are a play on long-term economic growth, long-term trade, and through thick or thin, they continue to deliver over the economic cycle. So we like rail. We’ve been marginal buyers off it recently because the valuation on CN and also on CP is fairly attractive.
ANDREW: Jason does note that the stocks have had that run-up lately and says we could even get a slightly negative reaction today.
MARTIN: Wouldn’t surprise me. I guess we’ll know in 20 minutes or so when the market opens. But if you look at a longer-term chart, you’ll see the stock really has been under pressure over the last three to five years. That’s not because earnings have really disappointed, but because there’s been a bit of a de-rating. We were taking money out of CN Rail, taking profits back in 2021 and 2022 at 25 times earnings. Today, it’s trading in the mid- to high-teens. So yes, it’s had a strong run in the last little while and may see a bit of profit-taking today. But investing is long term. It’s not about this quarter or this year, it’s about the next several years.
ANDREW: What about CGI? It’s one of these blue-chip IT services stocks that has suffered. Would you be a buyer right now?
MARTIN: We’ve looked at it, and to be honest, we prefer Constellation Software, one that we added to our portfolio this year because of the downdraft in valuations across anything IT-related or software-related. CGI is a good business, more on the IT services side than software. There are questions over its economic moat and how it will stand up to pressures from AI-related tools. But I don’t think it’s going to disappear overnight. We just prefer Constellation Software, which is a buyer of software companies that have suddenly become a lot cheaper than they were a couple of years ago.
ANDREW: Why do you prefer Constellation to CGI?
MARTIN: It’s more in their own hands, their destiny. With CGI IT services, there’s a question mark over the economic moat. Constellation has about a thousand different software businesses serving very small niche verticals. Their model is about buying other software businesses. Today, they have about 60,000 companies on their radar screen, and valuations are much cheaper than they were a couple of years ago. So there’s more compounding of earnings at Constellation than you would have with CGI, which is more about ongoing organic growth.
ANDREW: The headline on Barron’s is Starbucks is finally growing earnings again. Would you be a buyer of Starbucks?
MARTIN: We have been a buyer. We’ve been building our position in Starbucks over the past couple of years. The move to simplify the business and get back to basics is encouraging. Same-store sales globally are up five per cent, and in the U.S., the key market, up seven per cent. Management is talking about this being a turnaround, but they still have a long way to go. Historically, they made mid-teens margins, and today they’re around 10 to 11 per cent. If they get back to mid-teens margins with some revenue growth, that’s about $5 per share, less than 20 times earnings for Starbucks, historically a stock that has commanded 30 times earnings.
ANDREW: Are the glory days behind them?
MARTIN: I think the glory days probably are behind them. It is really a U.S. business. China hasn’t really worked out. They have some strong international markets, but the U.S. is about 70 per cent of the business and reasonably saturated. The issue was that it got overly complicated. It used to be simple. I used to stand in line for a tall black decaf, and it would take 10 minutes to get it. They’ve gone back to simplifying things, customer service, being a place people want to go. It’s not that complicated. The glory days may not come back, but the business still has attractive characteristics.
ANDREW: Martin, we’ll have to leave it there. It’s been great working with you over the years.
MARTIN: Absolutely, Andrew. With you departing, we too shall suffer. Your knowledge and your ability to teach us will be missed.
ANDREW: That’s a scary thought. Martin, thank you very much. Martin Cobb, senior vice-president, equities at Lorne Steinberg Wealth Management.
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This BNN Bloomberg summary and transcript of the April 29, 2026 interview with Martin Cobb are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
