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Can Utility Stock NextEra (NEE) Surprise in Q1 Earnings?

Diversified utility, NextEra Energy Inc. NEE is scheduled to report first-quarter 2016 results on Apr 28, before the market opens. Last quarter, the company reported a positive earnings surprise of 5.41%. Let’s see how things are shaping up for this quarter.

Factors to Consider

NextEra Energy is expected to benefit from the improving Florida economy, which is leading to the creation of new jobs. This has resulted in a strong real estate market in the state and increased the demand for utilities. Thus, the company expects benefit significantly from these factors.

However, like other utilities, NextEra Energy is also exposed to the impact of El Nino during the first half of 2016, which would start impacting results from the first quarter itself. In addition, the current weak commodity price environment will act as a headwind this quarter.

Surprise History

The above chart indicates that NextEra Energy was able to generate positive earnings surprises in three out of the last four quarters. The average positive surprise was 4.28%.

Earnings Whispers

Our proven model does not conclusively show that NextEra Energy will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.37.

Zacks Rank: Though NextEra Energy’s Zacks Rank #3 increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few operators in the utility-electric power sector worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:

Spark Energy, Inc. SPKE has an Earnings ESP of +53.57% and a Zacks Rank #1. The company is expected to report first-quarter 2016 results on May 11.

TECO Energy, Inc. TE has an Earnings ESP of +3.70% and a Zacks Rank #3. The company is expected to report first-quarter 2016 results on May 5 before the market opens.

Westar Energy, Inc. WR has an Earnings ESP of +10.64% and a Zacks Rank #3. The company is expected to report first-quarter 2016 results on May 4 after the market closes.

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NEXTERA ENERGY (NEE): Free Stock Analysis Report
 
TECO ENERGY (TE): Free Stock Analysis Report
 
WESTAR ENERGY (WR): Free Stock Analysis Report
 
SPARK ENERGY (SPKE): Free Stock Analysis Report
 
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