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What's in Store for Canadian Pacific (CP) in Q3 Earnings?

Canadian Pacific Railway Limited CP is scheduled to report third-quarter 2017 results on Oct 17, after the market closes.

Last quarter, the company came up with better-than-expected earnings but lower-than-expected revenues. Earnings (on an adjusted basis) improved 29.6% from the year-ago figure, while revenues increased 8.5% year over year.

Let’s see how things shape up this earnings season.

Factors at Play

The back-to-back hurricanes (Harvey and Irma) have been a major dampener to railroad operations and Canadian Pacific was no exception. Rise in fuel costs from natural disasters have the potential to hurt the bottom line in the third quarter.

With the automotive sector accounting for a significant revenue volume, softness in the same might limit the bottom-line growth in the soon-to-be-reported quarter.

Additionally, decreased revenues in other key segments like Sulfur and Fertilizer and Forest Products might further hurt results in the quarter.

Also, Canadian Pacific is a highly leveraged company. The stock has seen the Zacks Consensus Estimate for current-quarter earnings being revised 2.9% downward over the last 60 days. This, in turn, reflects the negative sentiment surrounding the stock.

However, the company’s cost-controlling efforts are expected to aid results in the quarter. Plus, its attempts to reward investors through share buybacks and raised dividend payments are impressive.

Earnings Whispers

Our proven model does not conclusively show that Canadian Pacific CSX is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as elaborated below.

Zacks ESP: Canadian Pacific has an Earnings ESP of -0.98% as the Most Accurate estimate is pegged at $2.32 per share, marginally lower than the Zacks Consensus Estimate of $2.34. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Canadian Pacific currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, combined with the company’s negative ESP leaves surprise prediction inconclusive.

We caution against all Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Investors interested in the broader Transportation sector may look into stocks worth considering like C.H. Robinson Worldwide, Inc. CHRW, Norfolk Southern Corporation NSC and Union Pacific Corporation UNP. For our model shows them to possess the right combination of elements to beat on earnings in their next releases.

C.H. Robinson has an Earnings ESP of +0.06% and a Zacks Rank #3. The company will report third-quarter 2017 results on Oct 31.

Norfolk Southern has an Earnings ESP of +0.87% with a solid Zacks Rank of 3. The company will report third-quarter 2017 results on Oct 25. You can see the complete list of today’s Zacks #1 Rank stocks here.

Union Pacific has an Earnings ESP of +0.05%. This #3 Ranked company will release third-quarter 2017 earnings numbers on Oct 26.

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Union Pacific Corporation (UNP): Free Stock Analysis Report
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