What happened
Canadian Pacific Railway's (CP 0.13%) Toronto-traded shares climbed 11.2% in January, according to data provided by S&P Global Market Intelligence, after the railroad reported better-than-expected earnings. The company's New York Stock Exchange-traded shares were actually up 15.4% for the month.
So what
On January 24, Canadian Pacific reported adjusted earnings of 4.55 Canadian dollars per share, easily beating the CA$4.17 consensus, on revenue of CA$2.01 billion that was also ahead of expectations. The company's operating ratio -- a measure of total expenses relative to its revenue -- hit a new low of 56.5% despite reporting fuel costs up 22% year over year thanks to lower equipment rents and materials.
Check out the latest Canadian Pacific earnings call transcript.

Image source: Canadian Pacific.
Railroad management was optimistic about 2019 as well, forecasting low double-digit earnings-per-share growth for the year. Canadian Pacific has a new multiyear agreement with Suncor Energy worth an initial CA$20 million per year, as well as a deal with Canadian retailer Dollarama worth updates of CA$50 million annually. Meanwhile, commodities including potash, which had strong volumes in 2018, are forecasted to remain strong.
Now what
Canadian Pacific was the pioneer of precision scheduled railroading (PSR), an operating philosophy designed to make railroads more efficient that is now sweeping through the industry. While U.S. rivals including CSX, Norfolk Southern, and Union Pacific are in the early stages of implementation, Canadian Pacific's conversion is largely complete, making it one of the least-risky companies in the sector.
There are some company-specific worries, notably a pipeline bottleneck in Alberta that could derail some of Canadian Pacific's crude by rail opportunities. Management is also cautious on U.S. grain pricing and demand, and there is the ever-present risk of an expanded trade war.
The railroads tend to ebb and flow with the broader economy, but for the foreseeable future, Canadian Pacific appears to be on the fast track. And thanks to its efficiency gains, the company is positioned well to weather a downturn when one eventually comes.
This is the best-of-class operator among railroads.