Transportation & Logistics: Model Updates for 2Q26 Earnings Preview

Research evidence excerpt

Transportation & Logistics: Model Updates for 2Q26 Earnings Preview

Brian P. Ossenbeck, CFA AC North America Equity Research

(1-212) 622-1023 10 July 2026 J P M O R G A N

brian.p.ossenbeck@jpmorgan.com

Investment Thesis, Valuation and Risks

Canadian Pacific Kansas City (Overweight; Price Target: C$135.00)

Investment Thesis

CPKC is the first and only USMCA railroad reaching Canada, the U.S., and Mexico. The

end-to-end merger should generate substantial revenue and cost synergies during the three-

year integration. We believe these synergies could be conservative given CP’s proven ability

to generate growth at low incremental costs, and the new combined network would create

new growth opportunities. CP and KCS also have a significant land portfolio and will further

commercialize these locations in addition to the CPKC merger, such as the transload facility

with Maersk in Vancouver. Operational synergies above and beyond the stated targets also

appear possible considering the T&E workforce at CP is significantly more productive than

KCSR in the U.S. Fuel economy is another source of possible upside if fewer interchanges

and more single-line routes can improve KCSR’s performance and narrow the gap with U.S.

leader CSX.

Valuation

Our December 2026 price target is based on our 2027 EPS estimate applied to a 22.5x

multiple, which is in-line with the average over the last five years. We believe this multiple

is warranted based on the heightened tariff and trade uncertainty, which adds some risk to

CPKC realizing the highest growth potential of any railroad, in our view. There is some more

uncertainty now than in prior years based on heightened geopolitical risk, however. The

merger should help CPKC generate double-digit EPS CAGR to a near doubling of EPS from