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Will Exelon (EXC) Fall Short of Estimates in Q1 Earnings?

Exelon Corporation EXC will release first-quarter 2016 financial results before the market opens on May 6, 2016. In the prior quarter, this electric and natural gas utility reported a negative earnings surprise of 2.56%. Let’s see how things are shaping up at the company prior to this announcement.

Factors to Consider
 
Amid difficult power market conditions, Exelon has resorted to cost reduction programs and expects to lower costs by $350 million in 2016.

At the same time, Exelon continues to invest in its transmission and distribution infrastructure, which ensures reliability of operations. Further, its regulated business provides a measure of certainty to its earnings stream. The company completed its much awaited merger with Pepco Holdings during the quarter and will invest nearly $25 billion in the next five years to strengthen its existing operations.

However, bonus depreciation is expected to have an adverse impact of 9 cents on Exelon’s earnings per share during 2016.

Surprise History

The above chart indicates that Exelon was able to deliver positive surprises in three out of the last four quarters. This led to an average positive surprise of 8.61%.

Earnings Whispers

Our proven model does not conclusively show that Exelon Corporation is likely to beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here.

Zacks ESP: This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 66 cents, resulting in 0.00% ESP.

Zacks Rank: Exelon Corporation has a Zacks Rank #4.

As it is, 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 to Consider

Here are a few stocks in the utility space worth considering on the basis of our model:

Hawaiian Electric Industries Inc. HE has an earnings ESP of +2.7% and a Zacks Rank #3. It is expected to report earnings on May 4, 2016.

Consolidated Edison, Inc. ED has an earnings ESP of +0.82% and a Zacks Rank #3. It is expected to report earnings on May 5, 2016.

Pattern Energy Group Inc. PEGI has an earnings ESP of +466.67% and a Zacks Rank #3. It is expected to report earnings on May 5, 2016.

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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
 
HAWAIIAN ELEC (HE): Free Stock Analysis Report
 
EXELON CORP (EXC): Free Stock Analysis Report
 
CONSOL EDISON (ED): Free Stock Analysis Report
 
PATTERN ENERGY (PEGI): Free Stock Analysis Report
 
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