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Canadian Pacific (CP) Q2 Earnings: Will it Beat Estimates?

Canadian Pacific Railway Limited CP, the Calgary, Canada-based railroad operator, is scheduled to report second-quarter 2017 results on Jul 19, after the market closes.

Last quarter, the company posted in-line earnings but better-than-expected revenues. However, earnings (on an adjusted basis) improved 4.4% from the year-ago figure. Quarterly revenues increased 4.7% year over year.

Why a Likely Positive Surprise?

Our proven model shows that Canadian Pacific is likely to beat on earnings because it has the perfect combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.98%. This is because the Most Accurate estimate stands at $2.07,whereas the Zacks Consensus Estimate is pegged lower at $2.05. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.  You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Canadian Pacific currently has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank #1 (Strong Buy), 2 or 3 (Hold) have a significantly higher chance of beating earnings estimates. Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

What is Driving the Better-than-Expected Earnings?

Canadian Pacific is expected to perform well in the second quarter owing to an improvement in the coal scenario. This positive sentiment regarding the stock can be gauged from the 5.12% increase in the Zacks Consensus Estimate for the second quarter to $2.05 per share over the last month.

The company’s efforts to reward investors through share buybacks and dividend payments are impressive. In May 2017, the company raised its quarterly dividend per share by 12.5%. The board also cleared a new share buyback program. 

However, high debt levels might hurt earnings in the second quarter.

Due to the tailwinds, shares of the company have outperformed the Zacks-categorized Transportation - Rail industry over the last one month. The stock has gained 6.75%, compared with the industry’s increase of 1.30% in the same period.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

American Airlines Group, Inc. AAL has an Earnings ESP of +2.75% and a Zacks Rank #1. The company will release its second quarter results on Jul 28. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allegiant Travel Company ALGT has an Earnings ESP of +1.36% and a Zacks Rank #2. The company will release its second quarter results on Jul 26.

Alaska Air Group, Inc. ALK has an Earnings ESP of +0.80% and a Zacks Rank #2. The company will announce its second quarter results on Jul 26.

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