* Q1 EPS C$0.82 vs $0.20 year earlier
* Operating ratio improves to 80.1 pct from 90.6 pct
* CP, Pershing Square in the late stages of proxy fight
* Results may not change shareholders' minds
* Stock slightly higher on TSX in afternoon
By Allison Martell and Susan Taylor
TORONTO, April 20 In the final rounds of a tough proxy fight, Canadian Pacific Railway Ltd said soaring profit and efficiency gains prove that its growth plan is back on track, but some analysts questioned whether the results were enough to sway shareholders.
The results on Friday mark the last set of financials before CP's May 17 annual meeting, where shareholders will pick between the company's slate of directors and that of activist investor William Ackman's Pershing Square Capital Management.
Pershing also wants to replace CP Chief Executive Fred Green with Hunter Harrison, who is credited with pumping up profits at rival Canadian National Railway Co when he was CEO there. Pershing argues that new leadership is the only way to boost CP's lackluster operating performance.
CP shares were slightly higher after the results, which were in line with an earnings forecast released last week, rising 61 Canadian cents to C$76.64 on Friday afternoon.
Some analysts said the improved numbers will not be enough to change many shareholders' minds about whom they will back in the proxy fight. They said many investors have become impatient waiting for better results under Green, who became CEO in 2006.
"As a CEO, you basically went backwards for six years, and then you put up one good quarter, and everyone's supposed to jump on the bandwagon?" said Edward Jones analyst Brian Yarbrough.
CP's closely watched operating ratio, which measures operating costs as a percentage of revenue, improved to 80.1 percent in the first quarter from 90.6 percent in the year-earlier period. The lower the number, the more efficient the railroad's operations.
"While we did experience a generally milder winter than last year, the improvements we are delivering are a result of the fundamental changes in our operation," said CP's chief operations officer, Mike Franczak.
'GOOD DOWN PAYMENT'
The quarterly results were helped by efficiency gains as well as growth in volume. In a release, Green said freight revenue rose by 18 percent in the quarter.
CP said it is confident it will continue to improve operating results, financial performance and increase shareholder value.
"It's a good down payment on where they're trying to go and we'll have to see if they can keep doing it," said Canaccord Genuity analyst David Tyerman. "Regardless of who's at the helm, the company needs to ... generate a better operating ratio."
Ackman said the operating ratio, despite the improvement, is still worse than when Green took over as CEO in 2006. He also said the results should not be compared with the previous year.
"Last year, when they put out their results they said, 'horrible winter, that's why we had a 90-plus percent operating ratio,'" Ackman said. "This time, what they don't remind you is that this is one of the best winters in the last 100 years."
In a survey conducted by Reuters April 11 to 17, five shareholders, including three large holders, said they backed Pershing's slate of directors.
One shareholder said his firm would support CP and three were undecided. The pro-Pershing group accounts for about 5 percent of CP's shares.
Pershing, which owns 14.1 percent of CP, argues that Harrison will produce efficiency gains faster than Green, and that under his leadership CP will reach an operating ratio of 65 percent by 2015.
CP repeated on Friday that it will reach an operating ratio of 70 to 72 percent in 2014, and 68.5 to 70.5 percent in 2016.
CP's operating ratio last year was 81.3 percent, the weakest number posted by any of North America's big railroads. Canadian National Railway, where Harrison was CEO from 2003 to 2009, reported a ratio of 63.5 percent.
SEES GROWTH IN ENERGY MARKETS
Green said that recent announcements on CP's energy business will take the company more than half way to its goal of boosting annual revenue in that segment by C$400 million.
The Calgary-based company said it still expects to increase its crude-by-rail business to 70,000 carloads in 2014, up from 13,000 carloads in 2011. It said it is on pace to ship 30,000 to 35,000 carloads of crude this year.
A weak thermal coal market in North America continued to drive exports to offshore markets, CP said. The railroad, which carries coal from the Power River Basin in the United States for export to Asia, said it expects its second-quarter thermal coal business to match or exceed the previous year.
For its first quarter, CP said net income rose to C$142 million, or 82 Canadian cents a share, from C$34 million or 20 Canadian cents in the same period of 2011.
Revenue rose by C$213 million to C$1.4 billion.
Analysts, on average, expected earnings of 80 Canadian cents a share on revenue of C$1.3 billion, according to Thomson Reuters I/B/E/S.