Canadian National RailwayCNI - the rail and rail-related transportation business operator - is scheduled to report second-quarter 2016 results on Jul 25, after the market closes .
Last quarter, the company posted a 5.8% positive earnings surprise. Moreover, the company's bottom line surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 8.28%. Let's see how things are shaping up for this announcement.
Factors at Play this Quarter
Canadian National is focused on improving its business through lower costs and improved efficiency. The company also has a well established network despite facing high level of competition from peers such as Canadian Pacific Railways Limited CP and CSX Corporation CSX . Its shareholder returns policy also continues to impress.
However, the current economic situation is in general not favorable for railroads industry. Over the past quarter, intermodal traffic has been on the decline which is a major concern for Canadian National. Declining coal volumes are not showing any signs of reversal either. A positive for Canadian National is that only around 5% of its revenues come from coal transport thus lowering the impact of volume reduction.
CDN NATL RY CO Price and EPS Surprise
CDN NATL RY CO Price and EPS Surprise | CDN NATL RY CO Quote
Earnings Whispers
Our proven model does not conclusively show that Canadian National 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 at least 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Most Accurate estimate stands at 82 cents, while the Zacks Consensus Estimate is pegged at 83 cents. Hence, the ESP is -1.21%.
Zacks Rank: The company carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company's negative ESP makes surprise prediction difficult.
Meanwhile, 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.
Stocks to Consider
Here is a stock you may want to consider as our model shows it has the right combination of elements to post an earnings beat this quarter.
United Parcel Services Inc. UPS has an Earnings ESP of +2.11% and a Zacks Rank #2.
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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.
