* Third-quarter net profit C$1.52/share, up from C$1.46
* Will buy back up to 18 mln shares in repurchase program
* Reaffirms 2012 forecast, will issue 2013 guidance in Q4
* Despite caution on economy, sees revenue growth
By Susan Taylor
TORONTO, Oct 22 (Reuters) - Canadian National Railway Co , Canada's largest rail operator, posted a modest increase in quarterly profit on Monday as revenues climbed for all its business segments, and affirmed its full-year forecast despite its caution over the economy.
CN also said it will put its strong balance sheet toward a C$1.4 billion ($1.41 billion) share buyback program, in which it will purchase up to 18 million common shares.
Edward Jones analyst Brian Yarbrough said that, overall, the results represent "just an OK quarter," with some positive notes. "I will say that the share buyback for C$1.4 billion is a positive number - that's pretty big," he said.
The Montreal-based company also maintained its guidance for 2012 earnings per share growth of 15 percent over 2011 and free cash flow generation of about C$1 billion.
"Given the weak economic context, however, we certainly have our work cut out, and the expectation of reaching the upper end of our guidance is not a foregone conclusion," said Chief Financial Officer Luc Jobin on a conference call with analysts.
CN said it would not issue forecasts for 2013 until it releases fourth-quarter results, due to economic unpredictability.
"While cautious about the strength of the economy, we see continued opportunities to grow our business in the longer term," Chief Executive Officer Claude Mongeau said in a statement.
"CN expects to increase revenues slightly faster than general growth in the North America economy and to accommodate this growth at low incremental cost," he added.
For the third-quarter, net income rose to C$664 million, or C$1.52 a share, from C$659 million, or C$1.46 a share in the same period a year earlier.
Analysts, on average, expected earnings of C$1.51 a share on revenue of C$2.53 billion, according to Thomson Reuters I/B/E/S.
Revenue in the quarter increased 8 percent to C$2.5 billion, while car loadings rose 3 percent.
Petroleum and chemical shipments led revenue growth, with a 15 percent gain, due largely to higher shipments of crude oil from western Canada. In the quarter, crude oil volume rose to a run rate of 40,000 carloads on an annualized basis.
Revenue for coal shipments rose 13 percent, while grain and fertilizer revenue climbed 10 percent and automotive revenue was up 9 percent.
CN's operating ratio, which measures operating costs as a percentage of revenue, increased by 1.3 percent to 60.6 percent. The lower the number, the more efficient the operation.
Operating expenses rose 10 percent to C$1.5 billion on higher labor and benefit costs, the company said.
Mongeau repeated to analysts on a conference call his publicly expressed concern that increased regulation could hurt the rail industry.
The federal government is drafting legislation that could impose service contracts between railroads and freight customers and give greater recourse to shippers in disputes with railways.
Mongeau argued such regulation was unnecessary, but if new rules were to be introduced, they should focus on mediated solutions with intervention only by the Canadian Transportation Agency.
"We don't think regulation is the right way to go. But if we do have regulation, we hope the government will not fall for the advocacy and the anecdotes, that they will follow the advice that I am providing," he said referring to industry association criticism of rail service levels.
Shippers want the right to call third-party arbitrators and say that legislation is needed to give shippers the service levels they need.
As of Monday's close, CN shares were up about 16 percent over last year.