(The following story by Scott Deveau appeared at Canada.com on July 26.)
OTTAWA — Shares in Canadian Pacific Railway Ltd. (CP/TSX) are expected to drift back to the $80.50 range in the near term, according to National Bank Finanacial analyst David Newman, after both CP and its larger rival, Canadian National Railway Co. (CNR/TSX), dismissed the merits of splitting their railway’s operations from its real estate assets.
Such a move was the centerpiece of a takeout bid on CP in April by Brookfield Asset Management Inc. that was rebuffed by the railway’s management.
Nevertheless, Mr. Newman said he was maintaining his $95 target price on the stock based on the takeover talks and his “sector perform” rating.
“There is always a potential for a transaction,” he said in a research note.
UBS analyst Fadi Chamoun raised his price target for CP following its second quarter results. He increased his target price to $93 from $85 in light of the takeover talks.
“The changes in our price target and rating demonstrate that the likelihood of a deal happening is high with the caveat that the projected upside from current level is not sufficient to justify a ‘Buy’ rating, particularly in light of uncertainty,” he said.
Mr. Chamoun downgraded his rating on CP to “neutral” from a “buy.”
RBC Capital Markets analyst Walter Spracklin said given the risks and complications associated with a potential private equity takeover, he was maintaining his $81 target price and his “sector perform” rating.