Canadian Pacific Kansas City (CP.CN, CP) 2Q26: 2% beat, guidance maintained, and still not a fan of the transcon

Research evidence excerpt

Canadian Pacific Kansas City (CP.CN, CP) 2Q26: 2% beat, guidance maintained, and still not a fan of the transcon

the company earns a 1.2% premium to its existing WACC, reflecting the nature of the company's

assets. In cases where fundamentals are expected to drive major change in cash flows beyond a two-year investment horizon, we

use multiples appropriate for a rate of growth expected in future earnings one year from now.

RISKS

Canadian Pacific Kansas City Ltd

Downside risks to our target price for CP include: sustained lower global oil prices; a material slow down in global economic

recovery; changes in government regulation or rule making at either Transport Canada or the US Surface Transportation Board;

geopolitical disturbances that limit global trade flows; a slowdown in US or global economic recovery; strikes or work stoppages at

the company's largely unionized workforce; risks attendant to the company's common carrier obligations and the transportation

of hazardous materials; strong dependence of the company's further operational improvement on a few key executives; material

changes in foreign exchange rates (appreciation of Canadian Dollar vs US Dollar). CP shares are also exposed to key man risks,

and any change in leadership would negatively impact the market's perception of future earnings growth.

Upside risks includes strong rail correlation- as shares of the rail stocks are highly correlated, positive changes in investor

sentiment for any of the publicly traded companies in the group could impact the value of CP shares.

RATINGS DEFINITIONS, BENCHMARKS AND DISTRIBUTION

EQUITY RATINGS DEFINITIONS

Bernstein brand

The Bernstein brand rates stocks based on forecasts of relative performance for the next 12 months versus the S&P 500 for

stocks listed on the U.S.