Markets

Will Norfolk Southern (NSC) Earnings Surprise This Season? - Analyst Blog

Pointing towards a line graph

Leading freight service provider Norfolk Southern Inc. ( NSC ) is scheduled to release its fourth-quarter 2014 financial numbers before the opening bell on Jan 26, 2015.

In the last reported quarter, the company delivered a 2.19% negative earnings surprise. Notably, the company's earnings have surpassed the Zacks Consensus Estimate in three of the past four quarters, with an average beat of 3.16%. Let's see how things are shaping up ahead of this announcement.

Factors Likely to Influence this Quarter

Norfolk Southern is riding high on gains from the Merchandise and Intermodal segments. The company's focus on expense management is also encouraging. We believe that the company is poised to gain from its superior service and network capabilities, infrastructural investments and increased efficiency in the intermodal network.

Moreover, petroleum forms an integral part of the revenue segment for railway companies. Hence, the declining crude oil prices will certainly hurt the industry's profitability in the upcoming quarters.

Earnings Whispers?

Our proven model does not conclusively show that Norfolk Southern is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or at least 3 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 -1.83%. This is because the Most Accurate estimate is pegged at $1.61 while the Zacks Consensus Estimate is higher at $1.64.

Zacks Rank: Norfolk Southern has a Zacks Rank #3 (Hold) which increases the predictive power of ESP; but when combined with a -1.83% ESP, it makes surprise prediction difficult.

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.

Stocks to Consider

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

Hawaiian Holdings Inc. ( HA ) with an earnings ESP of +10.53% and a Zacks Rank #1 (Strong Buy).

Allegiant Travel Company ( ALGT ) with an earnings ESP of +20.57% and a Zacks Rank #1.

Spirit Airlines, Inc. ( SAVE ) with an earnings ESP of +2.60% and a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

NORFOLK SOUTHRN (NSC): Free Stock Analysis Report

SPIRIT AIRLINES (SAVE): Free Stock Analysis Report

HAWAIIAN HLDGS (HA): Free Stock Analysis Report

ALLEGIANT TRAVL (ALGT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

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.

In This Story

ALGT NSC SAVE HA

Other Topics

Earnings Stocks