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Canadian National Railway (CNI) Q1 Earnings: Beat in Store?

Zacks Equity Research

Canadian National Railway Company CNI is scheduled to report first-quarter 2017 results on Apr 24, after market close.

Last quarter, the company posted a positive earnings surprise of 1.09%. Moreover, the company beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average positive surprise of 3.71%. 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 the Zacks Consensus Estimate this quarter because it has the perfect combination of two key ingredients.

Zacks ESP: The Earnings ESP for Canadian National Railway is +3.61% as the Most Accurate estimate is pegged at 86 cents while the Zacks Consensus Estimate is at 83 cents. A favorable Zacks ESP serves as a meaningful and 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 #3 (Hold). Please note that stocks with Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

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

Canadian National Railway Company Price and EPS Surprise

 

Canadian National Railway Company Price and EPS Surprise | Canadian National Railway Company Quote

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 first quarter as well. Canadian National Railway’s peers like Union Pacific Corporation UNP and Norfolk Southern NSC are also aiming to drive earnings growth by controlling costs.We are also encouraged by the improving scenario relating to coal.

The company’s initiatives to reward investors also raise optimism. During the first quarter, the company hiked its quarterly dividend payout by 10%.

Further, we also laud the company's C$2.5 billion 2017 capital investment plan, announced in the first quarter. The plan complements its efforts to promote safety along with enhancing productivity.

We are positive on the company’s view of strong markets in certain segments such as automotive, lumber and panes, refined petroleum products and grains. With better market conditions, volumes are expected to increase, thus resulting in higher revenues.

Price Performance

Shares of Canadian National Railway outperformed the Zacks categorized Transportation - Rail industry in the last three months. The stock gained 4.91% while the industry lost 1.6%.

Another Stock to Consider

Investors interested in the broader transportation space may also consider American Airlines Group AAL as our model shows it possesses the right combination of elements to post an earnings beat in the first quarter.

American Airlines has an Earnings ESP of +5.66% and a Zacks Rank #3. The company will report first-quarter 2017 results on Apr 27. You can see the complete list of today’s Zacks #1 Rank stocks here.

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