Calgary Alberta - Canadian Pacific (CP) investors have been hoping for gains ever since the company announced its deal to buy the Kansas City Southern (KCS) line last September.
 
That deal ended a six-month pursuit, which also included rival Canadian National Railway (CN), whose effort to top CP's bid was denied by a court.

I thought it was the Surface Transportation Board (STB) that killed CN's bid?

Now both Canadian railroads are rising, as Canadian grain and national resources are seen as much more valuable in the wake of the Russian invasion of the Ukraine.
 
Canadian Benefits
 
CP pursued KCS believing that the American railroad would boost its profits.
 
William Ackman of Pershing Square saw it that way.
 
He put $1 billion into CP stock near the end of last year.
 
It was Ackman's second foray into CP stock.
 
During the last decade, he won a proxy fight and replaced CP's CEO, exiting in 2016.
 
This time the purchase was friendly, supporting the KCS merger, and expressing regret that he had ever sold.
 
Over the last five years CP stock is up 163 percent and its dividend has doubled.
 
Much of that capital gain, however, has come in just the last year, first as it pursued the merger, and now as investors have sought safety during wartime.
 
American railroad stocks like Norfolk Southern (NS) have been beating the S&P averages over the last year, as inflation has risen and the efficiency of railroads for moving freight has looked more attractive.
 
But it's stock in the two Canadian roads have done best.
 
Canadian Backlash
 
Not everyone is happy, however.
 
The International Brotherhood of Teamsters in Canada have voted to go on strike against CP on 16 Mar 2022 seeking higher wages and benefits.
 
U.S. regulators have yet to approve the CPKC merger.
 
That's still expected later this year.
 
But the strike adds pressure on CP to sell its Kansas City Speedway line through Missouri to CN to get the deal over the line.
 
CN argues that getting the line would increase competition.
 
American fertilizer and grain companies have joined in its call, the former concerned with freight rates, and the latter with CP possibly preferring Canadian grain.
 
By the Numbers
 
Absent world tensions, CP isn't a great stock.
 
Revenue grew just 3.7 percent in 2021, although profits rose 16 percent to US$2.85 billion, US$4.20 per share.
 
Entering trade on 11 Mar 2022 CP had a market cap of US$72.8 billion, and a price to earnings ratio of 23.7.
 
The dividend, usually a draw for railroad stocks, now yields just .8 percent.
 
It's anticipation of safe and rising returns that has 10 of 13 analysts at Tipranks rating CP stock a buy.
 
Their average price target is just 9 percent ahead of where it's currently trading.
 
The Bottom Line on CP Stock
 
CP sought KCS for diversification.
 
Turns out Canada was the better bet. As the world isolates Russia, Canada is the best alternative for what Russia offers.
 
CP and CN represent low-cost methods for moving these goods to world markets.
 
As KCS is integrated into the CP system, there should be benefits from cross-border trade.
 
But these look to be marginal, compared with those that come from exposure to the Canadian economy.
 
The Canadian dollar, which was worth just 70 cents back when the pandemic started, is now worth nearly 80 cents.
 
That's the trade you're making when you buy CP stock.
 
Dana Blankenhorn - On the date of publication the writer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer.