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What Awaits Utility Stock Eversource (ES) in Q1 Earnings?

Diversified energy company, Eversource Energy ES is scheduled to report first-quarter 2016 results on May 5, before the market opens. Last quarter, the company reported a negative earnings surprise of 7.69%. Let’s see how things are shaping up for this quarter.

Factors to Consider

Eversource’s natural gas segment is a key growth driver at the company. The company has shifted around 1,000 customers to natural gas in January and expects customer growth to continue, going ahead. In fact, Eversource expects to add nearly 12,500 to its natural gas customer base in 2016.

On the flip side, the company’s service territories experienced historically warm temperatures last December. The warmer-than-expected winter lowered household expenditure on heating. This can not only offset the gain derived from customer growth, but may continue to dampen revenues in the to-be-reported quarter.

Nevertheless, Eversource remains focused on upgrading its distribution and utility transmission infrastructure, which will not only enable the company to provide reliable services to its customers but also aid in achieving its earnings growth target of 5–7% in 2016 and beyond. The company projects transmission capital expenditure of $911 million in 2016.

Surprise History

The above chart indicates that Eversource Energy was able to beat earnings estimate in two of the last four quarters. The average positive earnings surprise was 2.86%.

Earnings Whispers

Our proven model does not conclusively show that Eversource 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 -3.75%. This is because the Most Accurate Estimate stands at 77 cents, while the Zacks Consensus Estimate is pegged higher at 80 cents.

Zacks Rank: Though Eversource Energy’s Zacks Rank #3 increases the predictive power of ESP, the company’s negative 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 Utility-Electric Power space 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:

Consolidated Edison, Inc. ED has an Earnings ESP of + 0.82% and a Zacks Rank #3. The company is expected to report earnings on May 5.

Hawaiian Electric Industries Inc. HE has an Earnings ESP of + 2.70% and a Zacks Rank #3. The company is expected to report earnings on May 4.

Pattern Energy Group Inc. PEGI has an Earnings ESP of + 466.67% and a Zacks Rank #3. The company is expected to report earnings on May 5.

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EVERSOURCE EGY (ES): Free Stock Analysis Report
 
HAWAIIAN ELEC (HE): Free Stock Analysis Report
 
CONSOL EDISON (ED): Free Stock Analysis Report
 
PATTERN ENERGY (PEGI): Free Stock Analysis Report
 
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