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Canadian Pacific (CP) to Report Q1 Earnings: What's in Store?

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Canadian Pacific Railway Limited (CP - Free Report) is scheduled to report first-quarter 2021 earnings on Apr 21, after market close.

The company’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters, missed the same in one and reported in-line results on the remaining occasion. Notably, the Zacks Consensus Estimate for first-quarter earnings has been revised 6% downward over the past 60 days.

Against this backdrop, let’s discuss the factors that might have impacted Canadian Pacific’s performance in the March quarter.

We expect the company’s top line to have been bolstered by an upbeat Canadian grain movement in the to-be-reported quarter. Notably, the company is significantly investing in its grain fleet with additional hopper cars coming into service every week.

However, despite the recent improvement in the freight environment, it remains weaker than the year-ago levels. With the coronavirus continuing unabated, it might take a while for freight volumes to rebound fully to the pre-pandemic levels. Consequently, overall freight volumes are likely to have declined year over year in the March quarter.

Moreover, with Canadian Pacific investing substantially in its facility upgrades, the company is incurring an escalated level of capital expenses. This, in turn, is expected to have weighed on its bottom-line growth in the March quarter.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for Canadian Pacific this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. But that is not the case here. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Canadian Pacific has an Earnings ESP of -1.27% as the Most Accurate Estimate is pegged at $3.42 per share, lower than the Zacks Consensus Estimate of $3.46. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Canadian Pacific carries a Zacks Rank #3, currently.

Highlights of Q4 Earnings

Canadian Pacific’s earnings (excluding 68 cents from non-recurring items) of $3.88 (C$5.06) per share were in line with the Zacks Consensus Estimate. Meanwhile, quarterly earnings increased 7.5% on a year-over-year basis. However, quarterly revenues of $1,543.1 million (C$2,012 million) lagged the Zacks Consensus Estimate of $1,629.1 million. The top line also dipped 1.6% year over year due to lower freight revenues amid coronavirus-related woes.

Stocks to Consider

Investors interested in the broader Transportation sector may consider Alaska Air Group (ALK - Free Report) , United Parcel Service (UPS - Free Report) and Landstar System (LSTR - Free Report) as these stocks possess the right combination of elements to beat estimates this reporting cycle.

Alaska Air has an Earnings ESP of +1.03% and is Zacks #3 Ranked, presently. The company will release first-quarter 2021 results on Apr 22.

UPS has an Earnings ESP of +1.83% and a Zacks Rank of 3 at present. The company will release first-quarter 2021 results on Apr 27.

Landstar System has an Earnings ESP of +0.16% and is currently a #2 Ranked player. The company will release first-quarter 2021 results on Apr 21.

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