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Canadian Pacific Railway (CP) Q3 Earnings: A Beat in Store?

We expect Canadian Pacific Railway LimitedCP to beat expectations when it reports third-quarter 2015 results before the market opens on Oct 20.

Why a Likely Positive Surprise?

Our proven model shows that Canadian Pacific Railway is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP:Earnings ESP for Canadian Pacific Railway stands at +0.49% because the Most Accurate estimate is earnings of $2.04, whereas the Zacks Consensus Estimate is pegged at $2.03. This serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: Canadian Pacific Railway carries a Zacks Rank #3 (Hold). Note that the stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings.

On the other hand, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

What is Driving the Better-Than-Expected Earnings?

Canadian Pacific Railway is poised to gain significantly from the Industrial and Consumer products segment, largely because of high demand in the oil and gas market, mostly in the Bakken oil sands transport business.

Recently, the company closed the sale of its subsidiary Delaware & Hudson Railway Co.'s ("D&H") tracks for $214.5 million. The deal will certainly boost the company's cash position as well as improve its operating efficiency.

Canadian Pacific Railway also bought Canada's leading steel transload facility - Steelcare Inc. The transaction also included TransCare Logistics Corporation, Prometheus Six Inc. and East Port Warehousing & Distribution. This deal is likely to boost the company's top line to a large extent.

Other Stocks to Consider

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

Delta Air Lines Inc. DAL with an earnings ESP of +1.18% and a Zacks Rank #2.

Union Pacific Corporation UNP with an earnings ESP of +0.7% and a Zacks Rank #3.

Canadian National CNI with an earnings ESP of +1.15% and a Zacks Rank #3.

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UNION PAC CORP (UNP): Free Stock Analysis Report

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

DELTA AIR LINES (DAL): Free Stock Analysis Report

CDN PAC RLWY (CP): Free Stock Analysis Report

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


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

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