Transport Stocks Jul 25 Earnings Roster: CNI, SSW, WAB

The Q2 earnings season is well under way with 103 S&P 500 members (representing 25.8% of the index’s total market capitalization) having released their results as of Jul 21. While there have been some encouraging releases, the overall picture is quite similar to that of the last few quarters.

According to our latest earnings trends report, the bottom line has contracted 2.1% for the S&P 500 companies that have reported their quarterly numbers. Earnings growth is still in the negative territory for six of the 16 Zacks sectors with Energy being the biggest drag on the bottom line – which has contracted 64% for the sector.

Coming to the highly diversified transportation sector, which including airlines, railroads, shippers, rail car manufacturers among others, has already seen releases from 60% of the companies (S&P 500). Although the earnings growth rate is negative (6.2%) due to multiple adverse factors like declining coal shipments, increase in terror attacks, uncertainty following the Brexit vote, a healthy proportion of companies (66.7%) have outperformed the Zacks Consensus Estimate on the bottom-line front. The impressive earnings beat ratio has come on the back of bottom-line outperformance by key sector participants like Alaska Air Group (NYSE:ALK) , CSX Corporation (NASDAQ:CSX) , Delta Air Lines (NYSE:DAL) and United Continental Holdings (NYSE:UAL) .

Meanwhile, many reports are slated for release next week which will lend us a more comprehensive view of the earnings season. Overall, earnings are expected to decline 3.6% for the S&P 500 companies in Q2. In the event of the anticipations coming true, the Q2 earnings season would mark the fifth consecutive quarter of negative earnings growth.

Investors interested in the transportation sector eagerly await the Q2 earnings releases by major sector participants on Jul 25. Let’s take a look at the possibilities of a beat or miss these players have.

Canadian National Railway (NYSE:CNI) is a Montreal-based railroad operator that posted a 5.8% positive earnings surprise last quarter. 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.

According to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESPand a Zacks Rank #3 (Hold) or better – to increase the odds of an earnings surprise. The company has an Earnings ESP of -1.21% a Zacks Rank # 3. The combination makes an earnings beat unlikely for the second quarter (read more: Will Canadian National Railway Q2 Earnings Surprise?).

Seaspan Corporation (NYSE:SSW) is a global leader in independent containership management and ownership. The company maintains a fleet of more than 80 chartered vessels. The Marshall Islands-based shipping company has a Zacks Rank #3 and Earnings ESP of 0.00% as its Most Accurate estimate in line with the Zacks Consensus Estimate of $0.29. The combination makes an earnings beat improbable in the second quarter.

Westinghouse Air Brake Technologies Corporation (NYSE:WAB) , based in Wilmerding, PA, is a supplier of value-added, technology-based products and services for rail, transit and other global industries. The transportation company has an Earnings ESP of +0.94% with the Most Accurate estimate exceeding the Zacks Consensus Estimate of $1.07 by a penny. However, the carrier’s Zacks Rank # 4 (Sell) acts as a spoiler, making an earnings beat unlikely for the second quarter. As it is, we caution against Sell-rated stocks going into the earnings announcement.