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Is a Beat in Store for Norfolk Southern (NSC) in Q2 Earnings?

Virginia-based Norfolk Southern Corporation NSC is scheduled to report second-quarter 2017 results on Jul 26, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 9.63%. It also has an impressive earnings history, beating the Zacks Consensus Estimate in each of the last four quarters with an average beat of 5.04%.

Why a Likely Positive Surprise?

Our proven model shows that Norfolk Southern is likely to beat on earnings this quarter too, since it has the perfect combination of two key ingredients.

Zacks ESPEarnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.61%. This is because the Most Accurate estimate stands at $1.65, whereas the Zacks Consensus Estimate is pegged lower at $1.64. 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: Norfolk Southern 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 beating estimates.

Conversely, all 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 improvements in the Coal, Intermodal and Metals & Construction units. Similar to the previous quarter, this improvement is likely to aid overall volume growth in the second quarter as well.

The company’s focus on rewarding shareholders through share repurchase and dividends are also appreciative. In April, the company’s board cleared a quarterly cash dividend of 61 cents per share.

Norfolk Southern is making constant efforts to streamline its operations in order to increase productivity. Additionally, the company is looking to cut costs, which looks to drive the bottom line in the quarter to be reported.

However, the company’s high debt levels might hurt its results in the second quarter.

Other Stocks to Consider

Investors interested in the broader transportation sector may also consider other top-ranked stocks like American Airlines Group, Inc. AAL, Alaska Air Group, Inc. ALK and Canadian National Railway Company CNI, since our model shows that all these possess the right combination of elements to come up with an earnings beat in the next release.

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.

Canadian National Railway has an Earnings ESP of +2.00% and a Zacks Rank #2. The company will release its second-quarter 2017 earnings numbers on Jul 25.

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