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In a nutshell, CN’s “very strong” third-quarter financial results were driven by “effective cost control and improved productivity,” said President and Chief Executive Officer Claude Mongeau during yesterday afternoon’s earnings webcast and teleconference.

Unadjusted diluted earnings per share jumped 23 percent to $1.16; carloads increased 18 percent to 1.2 million units; revenue rose 15 percent to $2.05 billion; net income and operating income both went up 21 percent to $543 million and $815 million, respectively; and CN’s operating ratio improved 2 points to an industry-best 60.7 compared with third-quarter 2009 figures. In addition, traffic increased 3 percent compared with the second quarter’s level.

Revenue increased in all seven business groups during the third quarter, including coal by 28 percent, metals and minerals by 24 percent, automotive by 22 percent, intermodal by 19 percent, petroleum and chemicals by 10 percent, grain and fertilizers by 7 percent, and forest products by 4 percent.

“Across our book of business, we are making inroads,” said Mongeau.

Total operating expenses in the quarter shot up 15 percent year over year to $1.27 billion primarily because of higher fuel, purchased services/materials, equipment rental and labor/fringe benefit costs, said Executive Vice President and Chief Financial Officer Luc Jobin. Fuel expenses jumped 27 percent due to higher diesel prices and labor/fringe benefit costs rose 5 percent as total headcount increased 2.5 percent in the quarter, he said. Train and engine-service ranks increased 5 percent as traffic demand strengthened.

CN’s year-to-date operating ratio stood at 63.6, a 3.5-point improvement compared with the ratio at this time last year, said Jobin.

The strong third-quarter results enabled CN to enter the fourth quarter with growing momentum, he said.

“It appears that we have a solid year in the making,” said Mongeau, adding that the railroad hasn’t gained momentum solely from economic recovery.

CN is registering benefits from a number of service improvements, such as service-level agreements with several key intermodal terminal operators, a mine-to-ship approach benefiting Canadian coal producers and a scheduled grain plan in western Canada, he said. The Class I is trying to improve service “one carload at a time,” said Mongeau.

— Jeff Stagl