What's in Store for Canadian Pacific (CP) in Q2 Earnings?

Canadian Pacific (NYSE:CP) Railway Limited CP is scheduled to report second-quarter 2020 results on Jul 22, before market open.

The Zacks Consensus Estimate for second-quarter 2020 earnings has been revised upward by 11.1% to $2.71 in the past 60 days. The company has an impressive earnings history, having outperformed the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of 4.9%, on average.

Let’s discuss the factors that are likely to get reflected in the company’s performance in the quarter to be reported.

The company’s second-quarter top-line is likely to have benefited from impressive freight revenues and low costs. Also, the record Canadian grain movement in the June quarter is likely to have boosted the top-line performance.

Consistent improvement in operating ratio (operating expenses as a percentage of revenues) is expected to have driven the bottom line in the quarter to be reported. Notably, lower value of this key metric bodes well. However, supply-chain disruptions due to the coronavirus pandemic are likely to have affected the company’s second-quarter performance.

Although the impact from coronavirus was limited on volumes in the first quarter of 2020, the adversities with respect to volumes are expected to rise in the second quarter and thereafter. Notably, crude volumes are expected to have declined in the to-be-reported quarter.

What Does the Zacks Model Say?

Our proven model predicts an earnings beat for Canadian Pacific this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise as elaborated below. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Canadian Pacific has an Earnings ESP of +1.27% as the Most Accurate Estimate is pegged at $2.74 per share, higher than the Zacks Consensus Estimate of $2.71. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Canadian Pacific sports a Zacks Rank #1, currently.

Highlights of Q1 Earnings

Canadian Pacific's first-quarter 2020 earnings (excluding $1.08 from non-recurring items) of $3.3 (C$4.42) per share surpassed the Zacks Consensus Estimate of $2.86. Quarterly earnings also improved more than 55% year over year, primarily owing to low operating expenses. Quarterly revenues of $1,523.3 million (C$2,043) surpassed the Zacks Consensus Estimate of $1,412.3 million. The top line also increased in double digits year over year owing to rise in freight revenues.

Other Stocks to Consider

Investors interested in the broader Transportation sector may also check out other stocks worth considering like United Airlines Holdings (NASDAQ:UAL), Inc. UAL, Southwest Airlines (NYSE:LUV) Co. LUV and Air Lease (NYSE:AL) Corporation AL as these also possess the perfect combination to beat on estimates.

United Airlines has an Earnings ESP of +21.37% and a Zacks Rank #3, currently. The company will release second-quarter 2020 results on Jul 21.

Southwest Airlines presently has an Earnings ESP of +14.34% and is a Zacks #3 Ranked player. The company will release second-quarter 2020 results on Jul 23.

Air Lease has an Earnings ESP of +23.32% and is Zacks #3 Ranked at present. The company will release second-quarter 2020 results on Aug 6.

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