Kansas City Southern KSU is set to release third-quarter 2015 financial results before the market opens on Oct 16.
In the last quarter, the company posted a 0.00% earnings surprise. Let’s see how things are shaping up for this announcement.
Factors at Play
Recently, overall rail traffic volumes (excluding coal) fell 2.9% from Sep 2014 for American Railroads (AAR) and coal witnessed a 8.2% year-over-year drop in volumes.
Kansas City Southern has been facing weak domestic coal shipments of late. Moreover, a volatile Mexican peso against the strong U.S. dollar and declining coal prices continue to act as headwinds for the company.
However, favorable rail industry pricing, improving operational efficiency and the expansion of network and terminal capacity may act as catalyst for the company going forward.
Earnings Whispers
Our proven model does not conclusively show that Kansas City Southern is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. Unfortunately, this is not the case here as elaborated below.
Zacks ESP: The Most Accurate estimate and the Zacks Consensus Estimate are poised at $1.22. Hence, the ESP is 0.00%.
Zacks Rank: Kansas City Southern carries a Zacks Rank #3 (Hold) which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Meanwhile, we caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter.
Delta Air Lines Inc. DAL with an Earnings ESP of +1.18% and a Zacks Rank #2 (Buy).
Union Pacific Corporation UNP with an Earnings ESP of +0.7% and a Zacks Rank #3.
Canadian Pacific Railway Limited CP with an Earnings ESP of +0.49% and a Zacks Rank #3.
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