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Can AGL Resources (GAS) Pull a Surprise in Q1 Earnings?

AGL Resources Inc GAS is expected to report first-quarter 2016 results on May 3.

Last quarter the company reported a negative earnings surprise of 7.69%. On top of that, the energy services holding player’s average earnings surprise during the last four quarters came at negative 0.03%. Let’s see how things are shaping up for this earnings season.

Factors to Consider This Quarter

AGL Resources has a relatively low risk earnings growth profile. Positioned in a niche industry with high barriers to entry, AGL Resources enjoys a near-monopoly status in its area of operations. The company also has a large and stable customer profile, and a strong liquidity position.

Moreover, with an ever-increasing population, the need for electricity generation is also forever on the rise. AGL Resources should benefit from growing demand since its main business is distributing natural gas which is used for generating electricity.

However, a milder-than-normal winter can adversely impact the company’s first-quarter 2016 cash flows.

It will be interesting to see whether the events drive better-than-expected results.

What Our Model Indicates

Our proven model does not conclusively show that AGL Resources is likely to 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) to be able to beat estimates. 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% since both are pegged at $1.64.

Zacks Rank: AGL Resources has a Zacks Rank #3 which increases the predictive power of ESP. But we need a positive ESP to be confident of a beat. 

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

Stocks That Warrant a Look

Here are some companies in the energy sector with the right combination of elements to post an earnings beat this quarter:

Enable Midstream Partners, LP ENBL with an Earnings ESP of +21.05% and a Zacks Rank #2.  

Hercules Offshore, Inc. HERO has an Earnings ESP of +15.24% and a Zacks Rank #2.

DCP Midstream Partners LP DPM with an Earnings ESP of +9.52% and a Zacks Rank #2 (Buy).

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
 
AGL RESOURCES (GAS): Free Stock Analysis Report
 
ENABLE MIDSTRM (ENBL): Free Stock Analysis Report
 
HERCULES OFFSHR (HERO): Free Stock Analysis Report
 
DCP MIDSTREAM (DPM): Free Stock Analysis Report
 
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