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Will Canadian Pacific Railway (CP) Beat Earnings Estimates This Quarter?

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Canadian Pacific Railway Limited (CP - Free Report) is set to release its second-quarter 2013 results before the opening bell on Jul 24, 2013.

In the last quarter, the company delivered a 2.54% earnings surprise. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Canadian National Railway remains focused on volume expansion, operational efficiency, pricing revision and network capability upgrade. We believe that these measures will aid the company in registering higher revenues in the coming quarters. With the Industrial and Automotive segments looking bright, we expect these to counterbalance the weak outlook for the coal business. The company also faces uncertainty in the global economy along with labor issues, commodity risks related to the purchase of diesel, competition from other Canadian and U.S. firms and currency fluctuations. We expect the company to perform at par with the broader market in the coming months.

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 Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.

Negative Zacks ESP: This is because the Most Accurate estimate is $1.44 while the Zacks Consensus Estimate is higher at $1.48. This leads to an ESP of -2.70% for Canadian Pacific Railway.

Zacks Rank #3 (Hold): Canadian Pacific 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 -2.70% 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.

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

Kansas City Southern (KSU - Free Report) has an Earnings ESP of +1.79% and carries a Zacks Rank #3 (Hold).

Union Pacific Corporation (UNP - Free Report) has an Earnings ESP of +0.39% and carries a Zacks Rank #3 (Hold).

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