CP Executes Long-Term Agreement with Canpotex

Canadian Pacific Railway (TSE: CP) announced Thursday the signing of a new long-term agreement with Canpotex Limited.

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This deal further cements the long-standing relationship between the two companies, and supports the future growth of Canpotex. The seven-year contract, which runs until 2028, succeeds the current 10-year agreement between CP and Canpotex, which expires in 2022.

CP is the primary rail transportation provider supporting the delivery of Canadian potash to Canpotex’s overseas export markets.

As the leading potash export carrier, CP enables Canpotex’s supply chain to be efficiently and safely optimized from mine to port terminals by leveraging service options and network capacity of CP.

Management Commentary

CP president and CEO Keith Creel said, “We are pleased to have entered into this agreement and incredibly proud to continue our successful relationship with Canpotex. Canpotex and CP are like-minded organizations, focused on asset utilization and efficiency. This long-standing relationship makes sense for us both. We look forward to the opportunity to continue serving Canpotex and supporting growth.”

Wall Street’s Take

On December 17, Raymond James analyst Steven Hansen maintained a Buy rating on CP and raised its price target to C$105 (from $98). This implies 13.7% upside potential.

Overall, consensus on the Street is that CP is a Strong Buy based on e11 Buys and three Holds. The average Canadian Pacific price target of C$109.38 implies 18.3% upside potential to current levels.

TipRanks’ Smart Score

CP scores a 9 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock returns are very likely to beat the overall market.