Hunter Harrison has slashed costs and idled locomotives to reshape Canadian Pacific Railway Ltd. into a lean, efficient company.
Now comes the hard part: boosting revenue and profit, and proving to investors the Calgary-based transportation company is worthy of its lofty stock valuation.
On Wednesday, the chief executive officer will stand in front of a room full of investors and analysts in a suburb of New York to set new financial targets and outline how he plans to boost sales for the next four years.
Walter Spracklin, an equities analyst with RBC Capital Markets, calls CP's two-day conference a "landmark event" at which the company will shift its focus to revenue growth and increased market share from margin expansion.
Since taking the helm at CP in 2012 after a proxy fight led by William Ackman's Pershing Square, Mr. Harrison has cut more than 4,000 jobs and sidelined 400 locomotives and 11,000 rail cars. He has hand-picked a new management team and attempted to change the culture at the 133-year-old company that until recently was the most inefficient in North America.
CP's operating ratio, a closely watched measure of expenses as a per cent of revenue, has improved to 65.1 per cent from the industry's worst at 81 per cent in 2011.
"We're a different company after the management change, and the investor day will unveil the next chapter of the turnaround story," said CP spokesman Martin Cej.
Investors have applauded CP's turnaround, driving up the stock by 200 per cent since Mr. Harrison's arrival, and 40 per cent this year. CP, whose stock is trading at $225 on the Toronto Stock Exchange, has a price-to-earnings ratio of 26, the highest of its peers.
"We believe investor sentiment heading into this event is quite positive and we do not expect management's message to disappoint," said Mr. Spracklin, who has raised his 12-month share price target to $205 from $175 and expects the company to boost earnings per share by at least 25 per cent in 2015.
Turan Quettawala, an equities analyst with Scotia Capital, said in a research note he expects CP will outline how it will boost revenue by 12 per cent over the next few years, giving investors confidence the share price could hit $300.
"With a positive macro outlook, we think that CP's growth will come from economic growth as well as extraordinary revenue opportunities of $1-billion-plus over the next few years as CP focuses more on growth," said Mr. Quettawala, who raised his 12-month target for CP's share to $240 from $220.