Canadian Pacific Railway (TSE:CP) (NYSE:CP) beat expectations Wednesday as it reported a 20 per cent higher third quarter profit with revenues rising 8 per cent.
The period marks the first full quarter under its new CEO, Hunter Harrison - also the choice of CP's biggest shareholder, William Ackman's hedge fund, Pershing Square Capital Management. Harrison has vowed change at CP - whose past results have disappointed investors.
The company, Canada's second biggest rail operator, reported net income of $224 million, or $1.30 per share, compared to a profit of $187 million, or $1.10 per share, in the year-ago period.
Total revenues rose 8 per cent to $1.5 billion.
Analysts on average had expected earnings of C$1.23 per share, according to Thomson Reuters.
Shares of CP rose more than 5 per cent in Toronto to $92.32. Its stock is up over 23 per cent in the last 3 months.
"Momentum is building at Canadian Pacific. We have implemented new services; closed terminals and certain yard operations; and we've put a new leadership team in place," said president and CEO, E. Hunter Harrison, who took over as chief in late June after a protracted proxy battle that also removed the board's chairman and several board members.
"The team has made significant progress on operational improvements, controlling costs and on delivering results. And this is just the beginning."
CP said that its operating ratio, an important gauge of performance in the railway industry, was 74.1 per cent, lower by 170 basis points from 75.8 per cent in the year ago period.
The lower the number - which measures operating costs as a percentage of revenue - the more efficient its operations. The Calgary, Alberta-based company is targeting an operating ratio of 70 to 72 per cent by 2014 and 68.5 to 70.5 per cent by 2016.
During the third quarter, operating expenses grew 6 per cent to $1.1 billion.
Late Monday, Canadian National Railway Co. (CN)(TSE:CNR) posted a modest increase in third-quarter profits as sales climbed for all its business areas. Canada's largest rail operator also affirmed its full-year forecasts despite caution over the economy.
Montreal-based CN also kept its full-year guidance for 2012 earnings per share growth of 15 per cent. Due to economic unpredictability, CN said it would not issue forecasts for 2013 until it releases fourth-quarter earnings.