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Canadian Pacific (CP) Closes Detroit River Rail Tunnel Buyout

Zacks Equity Research
·2 min read

Canadian Pacific Railway Limited CP wrapped up the previously announced acquisition of Detroit River Rail Tunnel. Previously, the railroad operator had a 16.5% stake in the tunnel. By purchasing the remaining 83.5% stake, the company aims to reduce its operating costs pertaining to traffic movement through the 1.6-mile tunnel. The deal worth an approximate value of $312 million was inked in October 2020.

The company got full ownership of the tunnel from certain units of OMERS (Ontario Municipal Employees Retirement System), the defined benefit pension plan for municipal employees in the province of Ontario. OMERS had first invested in the Detroit River Tunnel partnership in 2001. Notably, the tunnel connects Windsor, Ontario and Detroit, MI.

At the time of announcing this deal, the railroad president and CEO Keith Creel stated: “This is an important corridor for CP, and by taking full ownership, we can better operate the asset to the benefit of our customers and the North American supply chain”.

The reduction in expenses related to Canadian Pacific’s movement of traffic through the tunnel will boost its bottom line further.

Zacks Rank & Key Picks

Canadian Pacific currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader Zacks Transportation sector are Knight-Swift Transportation Holdings KNX, FedEx Corporation FDX and Herc Holdings Inc. HRI. While Knight-Swift carries a Zacks Rank #2 (Buy), both FedEx and Herc Holdings sport a Zacks Rank #1 (Strong Buy), presently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected earnings per share (three to five years) growth rate for Knight-Swift, FedEx and Herc Holdings is pegged at 15%, 12% and 12.6%, respectively.

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FedEx Corporation (FDX) : Free Stock Analysis Report
 
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Herc Holdings Inc. (HRI) : Free Stock Analysis Report
 
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