as the lower-cost carrier with superior service. Further, this came at a transitional time for CP as the focus was largely on the implementation of Precision Railroading which likely pushed freight onto other transportation modes as well. As you can see below, CNI had nearly 18% points of cost advantage over CP (as

from 2012-2016 CNI increased volumes at more than double the rate of CP, reflecting mix as well as market share gains during CP's implementation of Precision Railroading. The combination of CNI's slower prospective earnings growth and high capex (20% of sales) implies 15.5x PIE under our DCF-derived methodology, imp

ur coverage universe, this is where CP and CNI see the largest difference relative to the other rails. We believe a large driver behind this is the Precision Railroading model implemented by Hunter Harrison at both CP and CNI (we go into more details in company-specific sections). However, we note that Canadian rail

and # of touch points need to be considered, which we discuss later), higher yields do translate to higher fixed cost leverage. Hunter Harrison's Precision Railroading model has helped CP and CN1 achieve beau in-class operating ratios. Deutsche Bank Securities Inc Page 15 CONFIDENTIAL - PURSUANT TO FED. R. CRIM

any Canadian Pacific industrials Railroads CPN CPUS Shifting Gears, Initiate Buy/$209 price target Following its multi-year implementation of Precision Railroading, CP is shifting gears from cost take-out to top-line growth. As such, we see at least 15% upside in shares as CP leverages its reduced cost base, i

network through a number of acquisitions, generated best-in-class volume growth, and removed costs through the implementation of Hunter Harrison's Precision Railroading model. { Figure 73: The rails solidly outperformed the S&P 500 from 2000-2008 with CNI leading the way 700 600 SOO OX 300 200 100 0 2000

is improvement came during Hunter Harrison's tenure as CEO (see figure below) when the operating ratio improved 1,600bps from 2012-2016. Harrison's Precision Railroading model helped transform CP through a relentless focus on asset optimization, network connectivity, and cost controls. To put this into context, CP r