CALGARY, Alta. — Canadian Pacific (CP) Rail reported strong third quarter earnings yesterday, with net income up 34% and total revenues up 3% over the same time last year.

“CP posted strong results for this quarter, and we delivered these results in the face of a strengthening Canadian dollar and increasing fuel costs,” said Fred Green, president and CEO of Canadian Pacific. “We moved record volumes in the quarter and with the recent acquisition of Dakota Minnesota & Eastern Railroad Corporation (DM&E), the largest regional railroad in the US, we are well-positioned to continue our growth.”

Freight revenue was up 2% for the railway with growth in coal and intermodal segments as well as grain revenue. But a 21% decline in forest products dragged down the railways bottom line. Sulfur and fertilizer shipments were also on the decline, the railway reported.

Gross tonne-miles increased 5% over 2006 and fuel prices surged 15%, CP reported. Over the first nine months of 2007, CP generated net income of $604 million compared to $651 million over the same period in 2006 a decrease of 7%. Freight revenues are up 4% to $3.4 billion this year. The railways outlook for 2007 remains upbeat, although dampened somewhat by the strong dollar.

“CP has delivered growth of 12% year-to-date on our adjusted diluted EPS through execution excellence and focused expense control,” said Mike Lambert, Chief Financial Officer. “But we see ongoing challenges with the strengthening Canadian dollar and fuel price pressures. As a result, our expectations for adjusted diluted EPS for the full year 2007 are at the lower end of our growth target range of $4.30 to $4.45 or nine to 13%. The stronger Canadian dollar will also impact revenues, and we expect to be just below our target of 4-6% revenue growth for 2007.”