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Canadian Pacific (CP) Stock Gets a Boost from U.S. Regulator
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Canadian Pacific Railway Limited’s (CP - Free Report) shares gained 5.65% during the trading session on Mar 15, to close at $77.10.
The Surface Transportation Board (STB), the economic regulator that oversees freight railroads, approved a deal of Canadian Pacific to take over Kansas City Southern. This approval resulted in CP’s gain and paved the way for creating the first freight rail network linking Canada, the United States and Mexico. Also, the approval, following the conclusion of two-year review process, implies that the first major railroad merger has been cleared by regulators in the United States in more than two decades.
The enterprise value of the deal is approximately $31 billion (inclusive of $3.8 billion outstanding debt). The deal is anticipated to draw synergies (annually) of roughly $1 billion within three years. The merged entity will be named as Canadian Pacific Kansas City Limited.
While giving the decision, STB has directed the merged entity to stick to the numerous commitments made regarding Metra and the surrounding Chicago communities. The commitments include installing and funding Positive Train Control wireless technology tie-ins at crossings that are located adjacent to Metra platforms. STB expects the merger to boost employment by adding 800 new union-represented operating positions in the United States. The merged entity is expected to compete more effectively with the bigger railroads.
This decision is effective from April 14. Per STB, petitions for reconsideration of the verdict have to be filed by Apr 4. Requests for stay must be filed by Mar 27.
Expressing delight on the verdict, Keith Creel, CP’s CEO said, “This decision clearly recognizes the many benefits of this historic combination." The STB, while giving the verdict, came to the conclusion that the merger will increase competition apart from creating multiple additional job opportunities.
Zacks Rank & Key Picks
Canadian Pacific currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the Zacks Transportation sector are:
Alaska Air Group (ALK - Free Report) is being aided by the improved air-travel-demand situation. For the fourth quarter of 2022, ALK reported better-than-expected results. ALK expects a 29-32% increase in the top line during first-quarter 2023.
ALK has been increasing its capacity to meet the upbeat demand. Capacity is expected to increase 11-14% in the first quarter of 2023.
United Airlines (UAL - Free Report) , currently carrying a Zacks Rank of 2, is seeing steady recovery in domestic and leisure air-travel demand. On the back of upbeat air-travel demand, UAL was profitable in fourth-quarter 2022 which was the third consecutive profitable quarter at UAL.
Driven by solid demand, management expects total revenue per available seat mile to grow 22-23% year over year for the first quarter of 2023. Total revenues are anticipated to grow almost 51% year over year.
The Zacks Consensus Estimate for first-quarter earnings has been revised upward by more than 100% in the past 60 days.
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Canadian Pacific (CP) Stock Gets a Boost from U.S. Regulator
Canadian Pacific Railway Limited’s (CP - Free Report) shares gained 5.65% during the trading session on Mar 15, to close at $77.10.
The Surface Transportation Board (STB), the economic regulator that oversees freight railroads, approved a deal of Canadian Pacific to take over Kansas City Southern. This approval resulted in CP’s gain and paved the way for creating the first freight rail network linking Canada, the United States and Mexico. Also, the approval, following the conclusion of two-year review process, implies that the first major railroad merger has been cleared by regulators in the United States in more than two decades.
The enterprise value of the deal is approximately $31 billion (inclusive of $3.8 billion outstanding debt). The deal is anticipated to draw synergies (annually) of roughly $1 billion within three years. The merged entity will be named as Canadian Pacific Kansas City Limited.
While giving the decision, STB has directed the merged entity to stick to the numerous commitments made regarding Metra and the surrounding Chicago communities. The commitments include installing and funding Positive Train Control wireless technology tie-ins at crossings that are located adjacent to Metra platforms. STB expects the merger to boost employment by adding 800 new union-represented operating positions in the United States. The merged entity is expected to compete more effectively with the bigger railroads.
This decision is effective from April 14. Per STB, petitions for reconsideration of the verdict have to be filed by Apr 4. Requests for stay must be filed by Mar 27.
Expressing delight on the verdict, Keith Creel, CP’s CEO said, “This decision clearly recognizes the many benefits of this historic combination." The STB, while giving the verdict, came to the conclusion that the merger will increase competition apart from creating multiple additional job opportunities.
Zacks Rank & Key Picks
Canadian Pacific currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks for investors interested in the Zacks Transportation sector are:
Alaska Air Group (ALK - Free Report) is being aided by the improved air-travel-demand situation. For the fourth quarter of 2022, ALK reported better-than-expected results. ALK expects a 29-32% increase in the top line during first-quarter 2023.
ALK has been increasing its capacity to meet the upbeat demand. Capacity is expected to increase 11-14% in the first quarter of 2023.
The Zacks Consensus Estimate for Alaska Air's first-quarter earnings has been revised upward by 29.4% in the past 60 days. The stock currently holds a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
United Airlines (UAL - Free Report) , currently carrying a Zacks Rank of 2, is seeing steady recovery in domestic and leisure air-travel demand. On the back of upbeat air-travel demand, UAL was profitable in fourth-quarter 2022 which was the third consecutive profitable quarter at UAL.
Driven by solid demand, management expects total revenue per available seat mile to grow 22-23% year over year for the first quarter of 2023. Total revenues are anticipated to grow almost 51% year over year.
The Zacks Consensus Estimate for first-quarter earnings has been revised upward by more than 100% in the past 60 days.