Canadian National Railway beat analyst expectations on adjusted earnings by a penny in the third quarter on revenue of $2.5 billion.

The railway reported after markets closed Monday that it earned $664 million, or $1.52 per diluted and adjusted share, for the period ended Sept. 30. That compared to $1.46 per diluted share, or $659 million, a year earlier on revenue of $2.3 billion.

Adjusting for one-time changes, CN's profits increased about 10 per cent from $1.38 per share in the prior year, excluding a gain from the sale of substantially all of the assets of IC RailMarine Terminal Company.

Analysts polled by Thomson Reuters had expected adjusted earnings of $1.51 per share.

Revenues increased by eight per cent from $2.31 billion in the third quarter of 2011. Revenue ton-miles rose seven per cent and carloadings increased three per cent.

Total carloads grew by 2.9 per cent during the quarter, led by strong growth by intermodal, chemicals and agricultural products, offset by decreased for coal, ores, metals and minerals.

CN's operating ratio increased by 1.3 points to 60.6 per cent.

Chief executive Claude Mongeau said the railway's focus on operational and service excellence helped it to post a "solid third-quarter performance" with revenue growing in all business segments.

"Petroleum and chemicals led the way with a 15 per cent increase in revenues, largely as a result of higher shipments of crude oil originating in Western Canada. CN's crude oil volume in the quarter rose to a run rate of 40,000 carloads on an annualized basis," he said in a statement.

CEO cautious with outlook

"We continued to improve service and were able to make solid progress in our key velocity, efficiency and safety metrics across our network."

Mongeau said he's "cautious about the strength of the economy" but sees opportunities to grow in the longer-term.

"Through our agenda of supply chain collaboration, CN expects to increase revenues slightly faster than general growth in the North American economy and to accommodate this growth at low incremental cost."

CN said the eight per cent increase in revenues were mainly derived from higher freight volumes due to growth of the North American and Asian economies, the railway's performance, freight rate increases and the weaker Canadian dollar.

Revenues increased for petroleum and chemicals (15 per cent), coal (13 per cent), grain and fertilizers (10 per cent), automotive (nine per cent), metals and minerals (seven per cent), intermodal (six per cent), and forest products (three per cent).

CN maintained its 2012 financial guidance to grow adjusted diluted earnings by share by up to 15 per cent over the $4.84 earned in 2011. It also expects to generate about $1 billion of free cash, taking into consideration a potential $250 million additional voluntary pension contribution in the fourth quarter.

The railway operates across Canada and the United States, providing access to ports in the Atlantic and Pacific oceans and Gulf of Mexico. It employs nearly 22,000 people and has 33,150 route-kilometres of track.

On the Toronto Stock Exchange, CN's shares closed down 61 cents at $87.07 in Monday trading.