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Canadian National (CNI) Q2 Earnings: A Beat in the Cards?

Canadian National Railway Company CNI is scheduled to report second-quarter 2017 results on Jul 25, after the market closes.

Last quarter, the company delivered a positive earnings surprise of 4.76%. Also, the company beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 3.45%.

Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Canadian National Railway is likely to beat estimates this quarter because it has the perfect combination of two key ingredients.

Zacks ESP: The Earnings ESP for Canadian National Railway is +2.02% as the Most Accurate estimate is pegged at $1.01, while the Zacks Consensus Estimate stands at 99 cents. A favorable Zacks ESP serves as a leading indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Canadian National Railway carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of an earnings beat.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.

Factors at Play

The company is expected to perform well in the second quarter, driven by an improvement in the coal-related scenario which should aid overall volumes. This can be gauged from the fact that the Zacks Consensus Estimate for the quarter has increased 3.1% in the last month.

The company’s efforts to reward shareholders through dividend payments and share buybacks are also impressive. The company’s board approved of a quarterly cash dividend of C41.25 cents per share in Apr 2017.

The company received good news on the labor front, when the International Brotherhood of Electrical Workers (IBEW) ratified a five-year collective labor deal in April, this year.

Additionally in Apr 2017, the company announced a $2.6 billion capital investment plan. The plan complements its efforts to promote safety and enhance productivity. This is another positive, expected to aid the second-quarter results.

However, the company’s high-debt levels coupled with a rise in fuel costs might hurt the bottom line in the second quarter.

Other Stocks to Consider

Investors interested in the broader transportation sector may also consider American Airlines Group, Inc. AAL, Alaska Air Group, Inc. ALK and Allegiant Travel Company ALGT, since our model shows that all these stocks possess the right combination of elements to post an earnings beat in their next releases.

American Airlines has an Earnings ESP of +2.19% and a Zacks Rank #1. The company is slated to release its second-quarter 2017 results on Jul 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

Alaska Air Group has an Earnings ESP of +0.40% and a Zacks Rank #2. The company will report its second-quarter 2017 financial numbers on Jul 26.

Allegiant Travel Company has an Earnings ESP of +0.34% and a Zacks Rank #2. The company will release its second-quarter results on Jul 26.

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Canadian National Railway Company (CNI): Free Stock Analysis Report
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