Leading freight service provider Norfolk Southern Inc. (NSC) is scheduled to release its third-quarter 2014 financial numbers before the opening bell on Oct 22.
In the last reported quarter, the company delivered a 2.87% positive earnings surprise. Notably, the company’s earnings have surpassed the Zacks Consensus Estimate in all of the past four quarters, with an average beat of 6.23%. Let’s see how things are shaping up ahead of this announcement.
Factors Likely to Influence This Quarter
NorfolkSouthern is likely to benefit from continuous investments in infrastructure, favorable pricing revisions and abundant opportunities within the transportation business sector. The company expects reasonable growth in the U.S. economy through the rest of the year, which should allow the company to maintain its solid momentum. Norfolk Southern’s focus on expense management is expected to boost its operating ratio, which stood at an all-time high of 66.5% in the second quarter.
However, a weak coal business continues to hurt the company’s revenues. Management expects low export coal volumes on account of increased competition, particularly from Europe. Further, the domestic metallurgical coal market is also expected to remain under pressure due to plant closure, weak seaborne pricing and strong competition from Australia.
Earnings Whispers?
Our proven model does not conclusively show that Norfolk 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, 2 or 3 for this to happen. Unfortunately, that is not the case here as elaborated below.
Zacks ESP: This is because both the Most Accurate estimate and the Zacks Consensus Estimate are poised at $1.83. This leads to an ESP of 0.00% for Norfolk Southern.
Zacks Rank: Norfolk Southern’s Zacks Rank #2 (Buy) increases the predictive power of ESP; however, an ESP of 0.00% makes surprise prediction difficult.
We particularly caution against stocks with 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 that investors may consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Atlas Air Worldwide Holdings, Inc. (AAWW) has an earnings ESP of +8.14% and carries a Zacks Rank #1 (Strong Buy).
CSX Corp. (CSX) has an earnings ESP of +2.08% and carries a Zacks Rank #2 (Buy).
Union Pacific Corp. (UNP) has an earnings ESP of +0.66% and carries a Zacks Rank #2.
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