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Report On Business Streamlining and updating routes highlights CP Rail strategy

Canadian Pacific locomotives sit in a rail yard in Montreal in this file photo.

Ryan Remiorz/THE CANADIAN PRESS

Upgrading tracks and terminals while tearing up underused railroads will help Canadian Pacific Railway Ltd. boost train speed and improve service, the company said on Thursday.

Chief operating officer Keith Creel said the streamlined and updated routes are keys to the company's goal of more than doubling profits by 2018.

"It's a powerful, powerful model," Mr. Creel told analysts and investors at a day-long presentation in White Plains, N.Y., offering the first glimpse of the Calgary-based rail company's four-year plan.

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The hightlights include:

- A capital spending plan of $1.5-billion a year.

- Investing more than $300-million in a rail traffic control system to allow trains to run faster, reduce delays and lift freight volumes.

- Doubling CP's capacity between Edmonton and Glenwood, Minn., by rebuilding the line.

- Extending four rail sidings in B.C. and Alberta.

- Removing 13 sidings in the same western corridor.

- Boosting train weights to improve productivity.

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- Improve train loading facilities to reduce delays and boost service.

Mr. Creel said total train speed should rise by 1 or 2 miles an hour, from the current 19. The North American average is 23 mph, according to Bloomberg data.

He acknowledged bottlenecks in the large U.S. rail hubs of Chicago and St. Paul, Minn., are in the way of achieving wider efficiencies and better service.

"If Chicago runs well in that corridor, CP runs well. If not, we're going to be challenged," Mr. Creel said.

CP's new targets include lifting annual revenue to $10-billion and cumulative cash flow of $6-billion by 2018.

Investors reacted by driving up the shares by almost 3 per cent per cent on the Toronto Stock Exchange on Thursday.

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In a research note, Desjardins analyst Benoît Poirier said if CP hits its targets, the stock price could reach $300 in the next two years, an increase of 30 per cent from today's $228.

"We view the new targets positively as they demonstrate management's confidence that CP is entering a new era focusing on velocity and revenue growth," Mr. Poirier said. "Looking ahead, the company highlighted that its upcoming growth strategy will be focused on leveraging its efficient network to offer better service, which should translate into higher market share and revenue growth."

RBC analyst Walter Spracklin said CP's guidance is in line market expectations, but more optimistic than his own. His 12-month share price target is $222, less than market value.

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