Canadian Pacific: Investor Day Reveals Solid Pipeline of Merger-Driven Revenue Synergies

Canadian Pacific held an investor day during which management provided incremental color around the rail's long-term growth prospects following the Kansas City Southern merger, which creates nascent, seamless single-linehaul services from Canada and the upper Midwest down through Texas, the Gulf of Mexico, and into Mexico. Management called out an impressive multiyear revenue pipeline approaching USD 5 billion. Clearly, CP won't secure all of that (we understand it has line of sight into about USD 1 billion), but the magnitude gives us incremental confidence in the firm's revenue synergy goals for the newly combined networks (around USD 1.5 billion). Synergies reflect tangible opportunities to grab market share from competing rails and trucking (truck to rail conversions) and capitalize on a solid runway of industrial development projects, many of which should benefit from nearshoring trends to Mexico (automotive production, for example).