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Canadian Pacific Railway (CP-T) reported a 23-percent drop in quarterly profit Wednesday after widespread spring flooding disrupted its operations in Canada and the United States.
Shares in CP, Canada's second-biggest railroad, were higher on Wednesday as the earnings' decline was smaller than expected. Industry analysts said the weather troubles were a short-term blip in a positive longer-term story.
"Historically CP is one of the least efficient railroads. There is a huge opportunity for it to close that gap. (Today's results) don't change our longer-term thesis," said Edward Jones analyst Brian Yarbrough.
"In our opinion they are finally focused on (improving efficiency) and they know what they need to do," he said.
CP said profit d and detoured traffic over other railways and incurred significantly higher operating costs to ensure delivery of our customers' shipments," CP Chief Executive Fred Green said in a statement.
The company said its operating ratio-an important measure of a railroad's productivity-rose to 81.8 percent in the quarter, from about 78 percent in the year-before quarter.
The lower the ratio, which measures operating costs as a percentage of revenue, the more efficient the railway.
By comparison, Canadian National Railway Co, CP's larger and more efficient rival, said this week its operating ratio was 61.3 percent in the second quarter.
The second quarter was the second straight quarter in which CP's results were hit hard by inclement weather. First-quarter profit tumbled 67 percent because of severe winter conditions, including avalanches and heavy snow.
CP's earnings came two days after CN announced better-than-expected quarterly earnings even though floods in Western Canada, forest fires and mudslides affected its operations.
CP said earnings fell to $128 million, or 75 cents a share, in the three months to the end of June. That compared with earnings of $166.6 million, or 98 cents a share, a year ago.
Revenue rose 2 percent to $1.26 billion.
Analysts, on average, expected CP to earn 73 cents a share, according to Thomson Reuters I/B/E/S.