(Adds comment from rival Canadian National on its outlook, paragraph 12)
By Allison Lampert
MONTREAL, June 21 (Reuters) - Canadian Pacific Railway Ltd warned on Tuesday it expected second-quarter revenue to fall about 12 percent from a year earlier, hurt by weak commodity volumes, the Fort McMurray wildfire in northern Alberta and a stronger Canadian dollar.
The Calgary-based company's Canadian-listed shares were down more than 2 percent at C$157.24 by midday in Toronto, and earlier fell more than 4 percent.
The Fort McMurray wildfire sharply cut output from the Alberta oil sands, and the company was forced to temporarily halt services to the city. Grain and potash volumes have also been weak.
In a note to clients on Tuesday, Desjardins analyst Benoit Poirier said the revision was not entirely unexpected, as the rail industry grapples with weaker volumes.
U.S. railroad CSX Corp also said in May it expected "high single-digit volume declines" to negatively impact second-quarter earnings.
Canadian Pacific said it expected adjusted earnings of about C$2.00 per share. It reported adjusted earnings of C$2.45 per share in the second quarter of 2015.
Analysts were expecting second-quarter earnings per share of C$2.46, according Thomson Reuters I/B/E/S.
However, CP said cost-cutting measures in the first half of the year and an expected improvement in commodity volumes would likely help the company meet its full-year guidance.
"While we acknowledge the environment remains challenging, additional cost reduction opportunities and the potential for stronger volumes in the back half of the year still lead us to believe that achieving double-digit EPS growth in 2016 is a possibility," Chief Executive Hunter Harrison said in a statement.
Desjardins' Poirier questioned CP's ability to hit its full-year target, given the lack of a clear sign of volume recovery.
"We expect the street to remain skeptical about CP's ability to achieve its 2016 guidance," Poirier wrote.
Poirier said he does not expect a similar revision from rival Canadian National Railway Co, which revised its 2016 outlook in April. A CN spokesman said on Tuesday the railway was maintaining that guidance.
CP said it expected a second-quarter operating ratio of about 62 percent. CP reported an operating ratio of 60.9 percent in the same quarter last year.
The operating ratio shows operating expenses as a percentage of revenue. The lower the figure, the better the performance.
CP's operating ratio was a record low 58.9 percent in the first quarter.
A spokesman for Pershing Square Capital Management, a top investor in CP, declined to comment on the revised outlook. (With additional reporting by Amrutha Gayathri in Bengaluru; Editing by Ted Kerr and Will Dunham)