January 29, 2008 / 1:15 PM / 10 years ago

CORRECTED - UPDATE 2-CP Rail's profit more than doubles

(Corrects the comparative 2007 per-share earnings figure in 9th paragraph to show amount before items; earlier version had amount after items. Removes reference to 2008 outlook in headline and lead) (Adds details, share price, comments)

By Jonathan Spicer

TORONTO, Jan 29 (Reuters) - Canadian Pacific Railway (CP.TO) said on Tuesday lower future income tax rates helped the company to more than double its fourth-quarter earnings.

Shares of Canada’s No. 2 railway climbed 5 percent to C$68.00 in morning trading as investors lauded the results, even though quarterly revenue was flat due to harsh weather and the appreciation of the Canadian dollar.

CP Rail earned a profit of C$342 million, or C$2.21 per share, in the last quarter of 2007. That’s up from C$146 million, or 92 Canadian cents a share, a year earlier.

Excluding foreign exchange gains, losses on long-term debt and other items, diluted earnings per share rose four percent to C$1.20.

The railway, which has operations in Canada and the United States, had warned in December its earnings would take a hit in the quarter from poor weather and high fuel costs.

“This restricted our ability to move the freight volumes we’d planned,” Chief Executive Fred Green said on Tuesday in a statement.

However, changes to the Canadian income tax rates gave the railway a C$146 million boost in the quarter.

Canadian Pacific said its revenue was C$1.19 billion, unchanged from a year earlier. The company’s operating ratio was 74.3 percent, compared with 73.1 percent a year earlier.

Looking ahead, the company expects 2008 diluted earnings of C$4.70 to C$4.85 per share before items, up from C$4.32 in fiscal 2007. It said strong demand for its bulk portfolio would drive earnings this year.

The company expects total revenue to grow by four to six percent in 2008.

However, “the outlook for growth in the North American economy continues to be uncertain,” the company’s statement said.

The outlook includes projected earnings from Dakota Minnesota and Eastern Railroad (DM&E), which Calgary, Alberta-based CP Rail acquired in September for about US$1.5 billion.

Avi Dalfen, analyst at Blackmont Capital, said the per-share profit before items beat his estimate of C$1.07 because of better fuel refining costs, lower compensation expenses and a contribution of 8 Canadian cents a share from the DM&E buyout.

Blackmont maintained its C$67 stock target, and “hold” recommendation.

$1=$1.00 Canadian Reporting by Jonathan Spicer; Editing by Bernadette Baum

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