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Canadian Pacific Railway Ltd CP

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Following Regulator's Rejection of CN’s Voting Trust, KCS' Board Deems CP’s Proposal Superior

Matthew Young, CFA Equity Analyst

Analyst Note

| Matthew Young, CFA |

As we highlighted in late August, the Surface Transportation Board rejected Canadian National’s proposed independent voting trust, which was to be the first step in a CN-Kansas City Southern tie-up. As a result, KCS has re-engaged Canadian Pacific’s still-valid offer to purchase KCS at around $300 per share, likely because a CP deal has a much greater chance of STB approval--CP has less network overlap with KCS, and CP's proposed voting trust already has STB approval. On Sept. 12, KCS’ board deemed CP’s proposal to be “superior” and is poised to accept it after a five-day period (end of day Sept. 15), during which CN has the opportunity to respond with a better offer.

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Company Profile

Business Description

Canadian Pacific is a CAD 7.7 billion railroad operating on 12,500 miles of track across most of Canada and into parts of the Midwestern and Northeastern United States. It is the second-smallest Class I railroad by revenue and route miles. In 2020, CP hauled shipments of grain (24% of freight revenue), intermodal containers (21%), energy products (like crude and frac sand), chemicals, and plastics (20%) coal (8%), fertilizer and potash (10%), automotive products (4%), and a diverse mix of other merchandise.

7550 Ogden Dale Road S.E.
Calgary, AB, T2C 4X9, Canada
T +1 403 319-3591
Sector Industrials
Industry Railroads
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type
Employees 12,709