UPDATE 1-CP Rail earnings up, but C$ and fuel a worry

VANCOUVER, British Columbia, Oct 29 (Reuters) - Canadian Pacific Railway (CP.TO) posted a 34 percent rise in third-quarter profit on Monday, but said it was feeling pressure from the higher Canadian dollar and fuel prices.

Canadian Pacific said because of pressure from the Canadian dollar and rising fuel costs it now expects earnings growth for full-year 2007 will come in at the low end of its forecast of C$4.30 to C$4.45 a diluted share.

Revenue growth for 2007 is also expected to be on the low end of its projection of 6 percent to 9 percent because of the high flying Canadian currency, the railroad said.

CP also said it was holding C$144 million in non-bank asset backed commercial paper that failed to mature during the third quarter as scheduled. It has taken a C$21 million charge and reclassified it as a long-term investment.

The railway, which has operations in both Canada and the United States, said it earned C$219 million ($230 million), or C$1.41 per share, in the quarter. That compared with a profit of C$164 million, or C$1.04 per share, in the same quarter a year ago.

This year's results were also boosted by the impact of a weaker U.S. dollar on its U.S.-denominated debt, and other items.

Operating income in the quarter was C$321.7 million, up from C$299.1 million. Revenue was C$1.2 billion, which was a 3 percent improvement over last year.

The company's operating ratio, an industry measure of efficiency, was 72.9 percent, an improvement from 74 percent in the year-ago quarter.

Canadian Pacific credited higher volumes and increased revenue from coal and intermodal shipments for its strong third-quarter results. Shipments of forestry products dropped in the quarter.

($1=$0.95 Canadian)

((Reporting by Allan Dowd, editing by Rob Wilson; Messaging: allan.dowd.reuters.com@reuters.com; Vancouver newsroom 604-664-7314)) Keywords: CPRAIL RESULTS/

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