Calgary Alberta - Canadian Pacific Railway Ltd. may surprise investors with the size of its broadly-anticipated share buyback program, J.P. Morgan said in a new report.
 
Analyst Thomas Wadewitz met with CP's new chief financial officer Bart Demosky on Wednesday and found him "very favourably inclined" toward share repurchases.
 
As a result, Mr. Demosky is expected to aggressively push for a substantial buyback program in the near future.
 
"We believe that CP is likely to focus first on returning cash through buy backs and over time dividends may become a larger piece of CP's distribution of cash," Mr. Wadewitz told clients.
 
He also anticipates the railway may announce a buy back program that utilizes free cash generation over multiple years, as opposed to simply announcing a one-year plan.
 
"While a buyback program is broadly anticipated by investors we believe there is still some room for an upside surprise in terms of the size of the program," the analyst said, reiterating his $200 price target and overweight rating on CP shares.
 
"We continue to have high conviction regarding strong 2014 EPS growth and runway beyond 2014."
 
Mr. Wadewitz noted CP's new CFO is clearly energized and sees meaningful opportunity to drive value creation.
 
The analyst called him "a strong addition" who will add to the powerful momentum already in place at CP.

Jonathan Ratner.