(Reuters) - Canadian Pacific Railway Ltd, in the midst of a bruising fight over performance with its biggest shareholder, forecast a four-fold increase in first-quarter earnings on Tuesday - well ahead of analysts' expectations.
Ten days ahead of the release of its results, CP said it expects to report first-quarter diluted earnings per share in the range of 80 to 83 Canadian cents, about 300 percent above its 2011 first-quarter EPS.
That is also far ahead of the 65 Canadian cents that analysts, on average, were expecting CP, Canada's second-biggest railroad, to report, according to Thomson Reuters I/B/E/S estimates.
"While a mild winter may have been a factor in this strong performance, we believe the results also demonstrate that the company has begun to reap the benefits of recent investments in its infrastructure and lean initiatives," said BMO Capital Markets analyst Fadi Chamoun in a note to clients.
Even so, CP's stock remained weak on the Toronto Stock Exchange, closing down 1.9 percent at C$73.26, in line with a fall in other North American rail stocks but weaker than the market in general.
CP's year-earlier first-quarter profit plunged 67 percent due to harsh winter weather, which included avalanches and heavy snow in British Columbia, the Canadian Prairies and the U.S. Midwest. Its EPS dropped to 20 Canadian cents in that quarter.
CP is due to report first-quarter results on April 20, some four weeks before May 17, when shareholders are due to vote for either CP's slate of directors or an alternative slate put forward by Pershing Square Capital Management, CP's biggest shareholder.
Pershing, which owns 14 percent of CP's shares, wants to replace CP Chief Executive Fred Green with the former CEO of Canadian National Railway Co, Hunter Harrison.
Pershing says Harrison will do a better job of improving CP's operating ratio, a measure of efficiency for railways and an important barometer of performance, which is the weakest among North American Class 1 railroads.
Chamoun estimated that CP's operating ratio in the first quarter has improved to the 80-81 percent range from 90.6 percent in the first quarter of 2011. The lower the ratio, which measures operating costs as a percentage of revenue, the more efficient the railroad. CN's most recent operating ratio was 64.7 percent.
CP said on Tuesday it delivered record operating performance figures in the first quarter of 2012 with improvements not only over the year-before quarter but also over the average of the previous three years' first quarters. It noted double-digit percentage improvements in train speeds, terminal dwell, active cars online and car miles per day.
The strong operating performance continued into April, CP said in a statement.
"The record operating metrics are now driving improved financial results. This is evidence that our multi-year plan is the right strategy to produce value for our shareholders," CP CEO Green said.
Not everyone agreed that the improved results would be enough for shareholders to keep backing Green and his team.
"Whether this is sufficient to shift sentiment around to CP Rail's management and board remains to be seen, but it appears to be unlikely in our view," Chamoun said.
Reporting By Nicole Mordant in Vancouver; editing by Matthew Lewis; and Peter Galloway