The railroad industry had a scary 2015, with the decline in domestic coal shipments hitting it hard. The struggles faced by the sector are evident from the fact that the Dow Jones U.S. Railroads Index shed around 30% in the year gone by. With the first-quarter 2016 earnings season around the corner for railroads, investors interested in the space are naturally looking for stocks that are likely to report higher-than-expected earnings per share in the first quarter of 2016. Consequently, if one has to choose between two renowned railroad operators Canadian National Railway Company CNI and CSX Corp. CSX – before the earnings season gets underway for the sector – opting to invest in the company that is likely to outperforming earnings, is a prudent move. Zacks Methodology to the Rescue It is not an easy task to gauge which of the two railroad operators will post better-than-expected earnings in the first quarter, especially when the entire sector is undergoing an upheaval. This is where our proven model comes in handy. The Zacks ESP model shows that Canadian National is likely to outshine the Zacks Consensus Estimate of earnings in the first quarter. Our model says that stocks with the combination of a favorable Zacks Rank – Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) – and a positive Earnings ESP have the potential to beat on earnings. Canadian National comes out with flying colors on this ground as it holds a Zacks Rank #2 and an earnings ESP of +4.48%. This is because the Most Accurate estimate of 70 cents per share is higher than the stock’s Zacks Consensus Estimate of 67 cents. Conversely, our model does not conclusively show that the Jacksonville, FL- based CSX Corp. is likely to figure alongside Canadian National as a strong earnings contender in the first quarter. The railroad operator, which will report results on Apr 12, has an unfavorable Zacks Rank #4 (Sell) and an earnings ESP of 0.00%. In fact, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions, as is the case with CSX Corp. Moreover, CSX Corp.’s earnings per share estimate for the first quarter has gone down by a penny to 37 cents over the last 60 days. On the other hand, Montreal, Canada-based Canadian National Railway has been witnessing positive estimate revisions, with its first quarter earnings per share estimate going up 2 cents to 67 cents over the last two months. Thus, going by our model, this time around, we expect Canadian National to beat the Zacks Consensus Estimate of earnings for the fifth successive quarter. Stock Price Favors Canadian National Canadian National is riding high this year and has seen a price appreciation in excess of 10% on a year-to-date basis. On the other hand, the picture is gloomy for CSX Corp. with its stock price down over 4% so far this year. With Canadian National gaining momentum and its price likely to appreciate further in the event of an earnings beat in the first quarter, we believe the company offers an attractive entry point at current levels. Going by the same argument, one should naturally avoid CSX Corp. The stated reasons apart, Canadian National’s momentum score of ‘A’ as opposed to ‘D’ carried by CSX Corp. is further indicative of why Canadian National is ‘the’ stock to buy, when compared with CSX Corp. Other Stocks Apart from Canadian National, investors interested in the broader transportation space may also consider Canadian Pacific Railway Limited CP and GOL Linhas GOL, both of which carry the same Zacks Rank as Canadian National. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report GOL LINHAS-ADR (GOL): Free Stock Analysis Report CSX CORP (CSX): Free Stock Analysis Report CDN NATL RY CO (CNI): Free Stock Analysis Report CDN PAC RLWY (CP): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research