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Freight rail transportation company, Kansas City Southern (KSU - Analyst Report), is set to release its second-quarter 2013 results before the opening bell on Jul 19, 2013.

In the last quarter, the company delivered a 2.30% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Despite the economic improvement, industrial production has remained volatile, which in turn has impacted the freight market. This instability in the U.S. economy may keep Kansas City Southern’s top-line growth under pressure in the upcoming quarter. Moreover, near-term growth for the company is expected to be tempered by lower coal production forecast by the U.S. Energy Information Administration.

However, cross-border intermodal business opportunity between the U.S. and Mexico bodes well for the company. Gradual development of the automotive sector along with expansion of network and terminal capacity will be beneficial for the company’s revenue growth.

Earnings Whispers

Our proven model does not conclusively show that KSU is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method)and a Zacks Rank #1 (Strong Buy) or #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Zacks ESP: This is because the Most Accurate estimate is 94 cents while the Zacks Consensus Estimate stands at 95 cents. This leads to an ESP of -1.05% for KSU.

Zacks Rank #3 (Hold): KSU’s Zacks Rank #3 reduces the predictive power of ESP.

We caution investors against the stock going into the earnings announcement, as a Zacks Earnings ESP of -1.05% combined with a Zacks Rank #3 lowers the possibility of an earnings surprise.

Other Stocks to Consider

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

Celadon Group Inc. (CGI - Snapshot Report) has Earnings ESP of +3.33% and carries a Zacks Rank #2 (Buy).

Wabtec Inc. (WAB - Snapshot Report) has Earnings ESP of +1.37% and carries a Zacks Rank #2 (Buy).

Expeditors International of Washington Inc. (EXPD - Analyst Report) has Earnings ESP of +2.33% and carries a Zacks Rank #3 (Hold).

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