On Monday, Jefferies started coverage on Canadian Pacific (NYSE:CP) Kansas City Limited (NYSE:CP), issuing a Buy rating and setting a price target of $105.00. The firm highlighted the company's growth prospects following its acquisition of Kansas City Southern (NYSE:KSU) in 2023, which established CPKC as the smallest but most rapidly expanding Class 1 railroad in North America.
The merger has created the first and only freight railway that connects Canada, the United States, and Mexico. This unique network positions CPKC to capitalize on new business opportunities and to grow alongside existing customers, according to the firm's analysis.
Jefferies expressed a particularly optimistic outlook on CPKC's potential in Mexico, noting Mexico's ascension as the leading source of U.S. imports, surpassing China. The firm believes CPKC's single-line railroad that directly links the three North American countries to Mexico's industrial regions will enable the company to benefit from Mexico's industrial expansion and the broader trend of nearshoring.
The firm anticipates that CPKC will achieve a high single-digit compound annual growth rate (CAGR) in top-line revenue, which is expected to outperform the mid single-digit industry average. This growth projection underscores the firm's confidence in CPKC's strategic positioning and market opportunities following its transformative acquisition.
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