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Factors Likely to Shape Norfolk Southern's (NSC) Q1 Earnings

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Norfolk Southern Corporation (NSC - Free Report) is scheduled to release first-quarter 2019 results on Apr 24, before market open.

In the last reported, the company delivered impressive results, with earnings and revenues beating the Zacks Consensus Estimate. Results were aided by volume growth among other factors.

In fact, Norfolk Southern has an impressive earnings surprise history. The company’s earnings surpassed the consensus mark in each of the trailing four quarters, the average being 8.1%.

Let’s delve deep to unearth the factors likely to influence this Norfolk, VA-based railroad company’s results in the soon-to-be-reported quarter.

We expect Norfolk Southern’s first-quarter results to be hurt by sluggish freight shipments. The downbeat freight scenario is quite evident from the fact that North American freight shipments have declined in each of the three months of first-quarter 2019, according to the latest Cass Freight Shipments Indexreport.

Additionally, the automotive division is likely to perform disappointingly in the soon-to-be-reported quarter similar to the past few quarters, thereby hurting results. Sluggish vehicle production in the United States is contributing to the below-par performance of the segment lately.

However, Norfolk Southern is likely to see an improvement in its operating ratio (operating expenses as a percentage of revenues) in this reporting cycle mainly owing to efforts toward reducing costs. The company recently implemented the precision scheduled railroading model to improve efficiencies.

Additionally, intermodal revenues are likely to be strong, thereby aiding its top line and mitigating the negative impact of sluggish freight revenues. The consensus mark for intermodal revenues is pegged at $732 million, indicating a rise from $678 million registered in the year-ago quarter.

What Does the Zacks Model Say?

Our proven model does not indicate earnings beat for Norfolk Southern in first-quarter 2019. This is because a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. However, that is not the case here as elaborated below.

Earnings ESP: Norfolk Southern has an Earnings ESP of -0.18%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Norfolk Southern carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP in the combination complicates its surprise prediction this reporting cycle. You can see the complete list of today’s Zacks #1 Rank stocks here.

We caution against stocks with a Zacks Rank #4 and 5 (Sell rated) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Investors interested in the Zacks Transportation sector may consider SkyWest (SKYW - Free Report) , Ryder System (R - Free Report) and Werner Enterprises (WERN - Free Report) as these stocks possess the right mix of elements to beat on earnings in the next releases.

SkyWest has an Earnings ESP of +0.83% and a Zacks Rank of 2. The company will report first-quarter 2019 results on Apr 25.

Ryder has an Earnings ESP of +4.04% and is a Zacks #3 Ranked player. The company is scheduled to release first-quarter 2019 earnings on Apr 30.

Werner Enterprises has an Earnings ESP of +2.06% and a Zacks Rank #3. The company will announce first-quarter 2019 financial numbers on Apr 25.

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