(Reuters) - Canadian Pacific Railway Ltd (CP.TO) beat analysts’ estimates for quarterly profit on Wednesday, driven by lower fuel expenses and higher shipments of coal, crude and fertilizers.
CP said its operating ratio, a closely watched productivity metric that measures expenses as a percentage of revenue, fell 220 basis points to a record-low of 56.1% in the third quarter. The lower the ratio, the more efficient a railroad.
Canada’s second-largest railroad operator said average fuel price fell 10% to $2.41 per gallon in the third quarter, leading to a 7.1% fall in fuel expenses.
Total carloads, the amount of freight loaded into cars during a specified period, rose 1.4%, while rail freight revenue per carload increased nearly 3%, CP said.
Revenue in the energy, chemicals and plastics segment, which also contains its crude-by-rail (CBR) shipments, rose about 13% to C$382 million in the quarter.
While CBR shipments fell short of the company’s expectations, CP remained optimistic that the new Alberta government will come to a resolution on the transfer of its crude contract.
The current government is trying to offload onto the private sector nearly C$4 billion of crude-by-rail contracts that were signed by the previous government, amounting to 120,000 barrels-per-day of crude.
The company expects crude volumes to increase in the fourth from the third, it said on a post-earnings call.
Larger rival Canadian National Railway Co (CNR.TO) also beat quarterly profit estimates but cut its adjusted earnings forecast for the year, citing declining freight demand in North America.
CP, which maintained its full-year adjusted profit outlook, reduced its volume expectations to low-single digit revenue ton-mile (RTM) growth from mid-single digit RTM on delays in the Canadian grain harvest and export potash volumes.
RTM measures the relative weight and distance of freight transported by a railroad.
Canadian railway operators have been hit by a slew of problems, including lower-than-expected crude shipments and a late harvest of grains due to wet weather.
CP said adjusted net income rose 8.7% to C$640 million ($490 million), or C$4.61 per share, in the quarter ended Sept. 30.
Analysts on average had estimated earnings of C$4.52, according to IBES data from Refinitiv.
Total revenue rose 4.3% to C$1.98 billion but fell short of analysts’ estimates of C$1.99 billion.
Reporting by Dominic Roshan K.L. and Shanti S Nair in Bengaluru; Editing by Maju Samuel