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A Canadian Pacific Railway crew works on their train at the CP Rail yards in Calgary.

TODD KOROL/REUTERS

Canadian Pacific Railway Ltd. boosted its full-year profit forecast on Tuesday amid strong growth in freight revenues.

Calgary-based CP, which reported third-quarter financial results after markets closed, said revenue increased by 3 per cent to $1.6-billion while diluted earnings per share rose by 50 per cent to $3.50.

Net income was $510-million for the three months ending Sept. 30. On an adjusted basis, per-share profit rose by 6 per cent to $2.90. Analysts expected adjusted per-share profit of $2.87.

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The operating ratio, an industry measure of revenue versus expenses, improved to 56.7 per cent from 57.7 per cent in the third quarter of 2016. (Lower is better.)

"Volume momentum grew over the course of the quarter, setting us up for a strong finish to the year. As a result, we are raising our 2017 guidance," said Keith Creel, CP's chief executive officer, in a statement accompanying the financial results.

CP said it expects 2017 adjusted earnings per share to increase by "double digits" from 2016's $10.29.

CP was widely expected to raise its 2017 guidance. Analysts said management's previous reluctance to raise the outlook was conservative, given strong freight revenues earlier in the year.

Over all, CP's carloads rose by almost 3 per cent, led by a 36-per-cent rise in carloads of metals, minerals and consumer products and a 19-per-cent increase in potash. Automotive shipments fell by 14 per cent. Energy and chemical carloads, including oil, rose by 12 per cent, CP said.

The number of grain carloads, CP's biggest line of business, fell by 5 per cent, compared with the same period a year earlier.

CP is Canada's second-largest railway, with a 20,000-kilometre network that extends into the United States.

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Fadi Chamoun, a stock analyst at Bank of Montreal, sees favourable conditions for CP in the coming months. These include increased demand for frac sand, rising container volumes and a possible increase in oil shipments.

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