MONTREAL — A stronger economic recovery will push Canadian National Railway to post solid profits this year despite facing a loonie hovering at par, the country’s largest railway said Monday.

The Montreal-based railway now aims for “solid double-digit growth” over 2009 earnings of $3.24 per share, and about $1 billion in free cash flow, compared to $700 million in 2009.

“It’s clear that the economy is on a recovery mode, perhaps a little bit faster than we anticipated up until now,” CEO Claude Mongeau said.

CN (TSX:CNR) earned $511 million, or $1.08 per diluted share, for the quarter ended March 31. That was up from a profit of $424 million or 90 cents per diluted share a year ago.

A higher Canadian dollar reduced net income by $41 million or nine cents per share. The quarterly results also included a $131-million after-tax gain on the sale of a portion of its Oakville subdivision.

Excluding the gain, CN reported adjusted diluted earnings per share of 80 cents, compared with 64 cents a year ago. The average analyst estimate according to Thomson Reuters had been for earnings of 79 cents per share.

Revenue totalled $1.97 billion, up six per cent from $1.86 billion.

CN said the increased revenue for its first-quarter was due mainly to higher freight volumes, a higher fuel surcharge and increased freight rates, offset in part by a stronger Canadian dollar.

Growth was experienced across all of its businesses, with carloads growing by 16 per cent.

Revenue ton-miles, measuring the relative weight and distance of rail freight transported by CN, increased 14 per cent. Its operating ratio, which measures the railway’s efficiency, was up 2.4 percentage points to 69.3 per cent.

“We are very pleased this is not just about the economy recovering. It’s also about our ability to serve our customers and help them gain market share in their own markets,” Mongeau told analysts.

Capital spending for the year is forecast at $1.6 billion for the year, up from an earlier plan to spend $1.5 billion.

It generated $493 million in free cash, up from $286 million last year. The increase was due to an improved operating performance and reduced tax instalments.

Shares in CN, which announced its results after the close of markets, were up 77 cents at $63.72 on the Toronto Stock Exchange on Monday.