Is Canadian National (CNI) Poised to Beat? - Analyst Blog

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Canadian National Railway Company CNI is scheduled to report its first-quarter 2014 financial numbers after the closing bell on April 22, 2014.

In the last quarter, the company delivered a 4.2% negative earnings surprise. Let's see how things are shaping up for this announcement.

Factors to be Considered

Canadian National expects significant economic growth in North America to support around a 3% rise in industrial production in 2014. The company foresees mid-single-digit growth in business volumes in 2014 on strong demand across most of its businesses with improved consumer confidence in North America and domestic retail markets.

Canadian National faces stiff competition from rail carriers and other modes of transportation. It also faces competitive threat specifically from Canadian Pacific Railway, which operates the other major rail systems in Canada and services most of the areas which Canadian National serves. Canadian National also faces intense competition from trucking companies in eastern Canada. Also, economic conditions may affect the working dynamics of the company.

Canadian National is vulnerable to the volatility in fuel prices due to economic changes or supply disruptions. Rising fuel prices lead to higher expenses for the company. Thus, to counter the effect of unstable fuel prices, Canadian National has implemented a fuel surcharge program with the aim to offset the impact of rising fuel prices.

Earnings Whispers

Our proven model does not conclusively show that Canadian National Railway is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. Unfortunately, this is not the case here as elaborated below.

Negative Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. This leads to an ESP of -1.7% for Canadian National Railway as the Most Accurate estimate stands at $0.57 while the Zacks Consensus Estimate is higher at $0.58.

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Zacks Rank #3 (Hold): Canadian National Railway's Zacks Rank #3 decreases the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks Earnings ESP of -1.7% combined with a Zacks Rank #3 lowers the possibility of an earnings surprise.

Other Stocks to Consider

Here are some companies to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.

Arkansas Best Corp. ABFS has Earnings ESP of +20.0% and carries a Zacks Rank #3.

Allegiant Travel Co. ALGT has Earnings ESP of +12.10% and carries a Zacks Rank #2 (Buy).

Alaska Air Group, Inc. ALK has Earnings ESP of +9.7% and sports a Zacks Rank #1 (Strong Buy).



ARKANSAS BEST ABFS: Free Stock Analysis Report

ALLEGIANT TRAVL ALGT: Free Stock Analysis Report

ALASKA AIR GRP ALK: Free Stock Analysis Report

CDN NATL RY CO CNI: Free Stock Analysis Report

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