Will Canadian National Railway (CNI) Miss Earnings Estimates? - Analyst Blog


Canadian National Railway Company ( CNI ) is slated to report its second-quarter 2014 financial results on Jul 21, after the market closes. In the last reported quarter, the company had delivered a 2.79% earnings surprise. Let's see how things are shaping up prior to this announcement.

Factors Influencing Results this Quarter

We believe strong growth across most of its segments is expected to boost Canadian National Railway's revenues and earnings in the coming months. Strength in the Intermodal segment along with robust grain export and increased automotive shipments are expected to create tailwinds for the company. Additionally, strong crude-by-rail, expected market gains from frac sand and investments in infrastructure will likely boost its long-term prospects.

However, a soft recovery in global economic conditions may induce a negative impact on the volume of rail shipments and revenues. Volatility in fuel prices owing to change in geo-political issues can also affect the company's expenses. Further, Canadian National Railway expects a financial headwind in 2014 due to higher depreciation expenses on account of addition of new assets, which could potentially affect its earnings.

Earnings Whispers?

Our proven model does not conclusively show that Canadian National Railway is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here as elaborated below.

Zacks ESP: Earnings ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -1.09% for Canadian National Railway.

Zacks Rank: Canadian National Railway carries a Zacks Rank #3 which increases the predictive power of ESP. However, we lack a positive ESP, which deters us from being confident of an earnings surprise.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revision momentum.

Other Stocks to Consider

Here are some other companies to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Old Dominion Freight Line Inc. ( ODFL ) with earnings ESP of +2.44% and a Zacks Rank #1.

Genesee & Wyoming Inc. ( GWR ) with earnings ESP of +0.89% and a Zacks Rank #1.

Norfolk Southern Corp. ( NSC ) with earnings ESP of +0.58% and a Zacks Rank #2.

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CDN NATL RY CO (CNI): Free Stock Analysis Report

NORFOLK SOUTHRN (NSC): Free Stock Analysis Report

GENESEE & WYO (GWR): Free Stock Analysis Report

OLD DOMINION FL (ODFL): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CNI , NSC , GWR , ODFL



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