Canadian National Railway (CNI) Q3 Earnings: What's In Store?

Canadian National Railway Company (NYSE:CNI) is scheduled to report third-quarter 2017 results on Oct 24, after market close.

Last quarter, the company delivered in-line earnings. However, it surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 2.6%. Let’s see how things are shaping up for this announcement.

Factors at Play

Canadian National Railway's efforts to control costs are impressive. We expect the company’s bottom line to benefit from lower costs in the third quarter as well. Canadian National Railway’s peers like Union Pacific Corporation (NYSE:UNP) and Canadian Pacific Railway Limited (NYSE:CP) are also aiming to drive earnings growth by controlling costs. We are also encouraged by the improving scenario relating to coal.

Robust volume growth continues to aid Canadian National. In fact, the top line is expected to benefit in the third quarter from increased volumes in key segments such as Canadian grain and fertilizers, overseas intermodal traffic, frac sand apart from coal.

High fuel costs are, however, expected to hurt the company's bottom line in the third quarter. Its high debt levels also raise concerns.

What Does Our Model Say?

Our proven model too does not conclusively show that Canadian National will beat earnings in third-quarter 2017. 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. However, that is not the case as explained below.

Zacks Rank: Canadian National carries a Zacks Rank #3 (Hold).

Zacks ESP: Canadian National’s Earnings ESP of -0.57% acts as a spoiler. The Zacks Rank combined with a negative Earnings ESP leaves the surprise prediction inconclusive.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

A Railroad Gem

Investors interested in the Zacks Rail industry may consider Norfolk Southern (NYSE:NSC) as our model shows that this company possesses the right combination of elements to deliver an earnings beat this quarter.

Norfolk Southern has an Earnings ESP of +0.67% and a Zacks Rank #3. The company will report third-quarter results on Oct 25. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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