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What's in Store for Norfolk Southern (NSC) in Q4 Earnings?

Zacks Equity Research

Norfolk Southern Corporation NSC is scheduled to report fourth-quarter 2017 results on Jan 24, before the market opens.

Last quarter, the company delivered a positive earnings surprise of 6.7%. Also, the company’s bottom line surpassed the Zacks Consensus Estimate in all the trailing four quarters with an average beat of 5.9%.

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

Factors at Play

Norfolk Southern’s automotive unit have been struggling due to sluggish vehicle production in the United States. This is likely to hurt results in the to-be-reported quarter. Notably, automotive volumes declined 2% as of Nov 25. The company’s high debt levels are an added concern.

However, the company is making constant efforts to streamline its operations in order to increase productivity. The company’s cost-cutting efforts to drive bottom-line growth are likely to aid results in the quarter. This is also anticipated to boost operating ratio in the same time period.

Additionally, the improved coal and intermodal scenario might benefit the top line. At the Credit Suisse 5th Annual Industrials Conference, the company's chief financial officer stated that intermodal volumes have increased 7% as of Nov 25. The scenario was also encouraging for other segments, including coal.

Earnings Whispers

Our proven model does not show conclusively that Norfolk Southern is likely to beat estimates in fourth-quarter 2017. This is because a stock needs to have both — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. However, that is not the case here as highlighted below.

Zacks ESP: Norfolk Southern has an Earnings ESP of -0.37% as the Most Accurate estimate is pegged at $1.55 per share lower than the Zacks Consensus Estimate of $1.56. 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 #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about a possible earnings surprise. Hence, a negative ESP leaves our surprise prediction inconclusive.

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

Norfolk Souther Corporation Price and EPS Surprise

Norfolk Souther Corporation Price and EPS Surprise | Norfolk Souther Corporation Quote

Stocks to Consider

Investors interested in the broader Transportation sector may consider Ryder System, Inc. R, Spirit Airlines, Inc. SAVE and Union Pacific Corporation UNP stocks comprising the right combination of elements to beat estimates in their next releases this time around.

Ryder has an Earnings ESP of +0.24% and a Zacks Rank #2. The company will report fourth quarter results on Feb 16.

Spirit Airlines has an Earnings ESP of +1.71% and a Zacks Rank of 3. The company will report fourth-quarter earnings on Feb 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

Union Pacific has an Earnings ESP of +0.45% and a Zacks Rank #2. The company will release fourth-quarter earnings on Jan 25.

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