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The Canadian Pacific railyard is pictured in Port Coquitlam, B.C., in this file photo from Feb. 15, 2015.BEN NELMS/Reuters

Canadian Pacific Railway Ltd. surged the most in more than two years as speculation mounted that the company may drop its attempt to purchase Norfolk Southern Corp.

Canada's second largest railway gained 9.6 per cent to $164.16 at 12:06 p.m. in Toronto. Shares rose as much as 11 per cent earlier, their biggest intraday gain since October, 2013.

Faced with growing political and shipper opposition to the deal, Canadian Pacific may need to adopt a different strategy, chief executive officer Hunter Harrison said Thursday without being specific. His comments may open the door to Canadian Pacific ending its pursuit of the No. 2 railway in the eastern United States, according to analysts from at least eight firms.

"The company (for perhaps the first time) gave the indication that it could pull back from pursuing the proposed deal in the near term," Allison Landry, an analyst at Credit Suisse Group AG, said in a note to clients Friday.

Federal and state lawmakers, shippers and railway operators have written letters to the U.S. Surface Transportation Board opposing any proposed transaction, even though a formal evaluation process hasn't begun.

"When you're playing the game and somebody changes the rules on you, you have to review your strategies," Mr. Harrison said Thursday on a conference call. A Canadian Pacific representative declined to provide additional comment Friday.

The railway was raised to outperform from sector perform by RBC Capital Markets analyst Walter Spracklin. The stock's drop of about 40 per cent through Thursday from a 2015 peak means the valuation now reflects risks associated with the company, he said. The shares closed at a record $242.51 last March. Dropping the Norfolk Southern bid may result in Canadian Pacific reviving a stock repurchase plan – a scenario to which Mr. Harrison alluded on Thursday. A share buyback "could measure into the billions" annually, Spracklin said, pointing to the $4.7-billion that Canadian Pacific spent on repurchases in 2014 and 2015.

Buybacks have "worked well for us" in the past, Mr. Harrison said.

Letting go of Norfolk Southern would benefit Canadian Pacific stock by turning executives' attention squarely toward running their railway, wrote National Bank Financial's Cameron Doerksen.

"Our fear is that CP management is consuming too much time and effort on fighting for the merger at a time when the company is facing its own volume-related challenges," he wrote. "As such, we would view an abandoning of the merger effort as a potential positive for CP shares."