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Will Public Service Enterprise Group (PEG) Beat Earnings?


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We expect Public Service Enterprise Group Inc. (PEG - Analyst Report) to beat expectations when it reports second quarter 2013 results on Jul 30.

Why a Likely Positive Surprise?

Our proven model shows that Public Service Enterprise Group is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +4.35%. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

The combination of Public Service Enterprise Group’s Zacks Rank #3 (Hold) and +4.35% ESP makes us confident of a positive earnings beat on Jul 30, 2013.

What is Driving the Better Than Expected Earnings?

Public Service Enterprise Group has a solid portfolio of regulated and non-regulated utility assets that offer a stable earnings base and substantial long-term growth potential. Over the next 10 years, the company intends to invest $3.9 billion in order to protect and strengthen its electric and gas systems against increasingly frequent severe weather conditions. Going forward, the low-cost nuclear fleet, assumed rate relief and added generating capacities will drive Public Service’s earnings growth.

Also, management has taken several measures to improve its financial stability and reduce the overall risk profile. This includes opportunistically monetizing assets that no longer are a strategic fit, reducing international exposure, significantly hedging future generation business and paying down debt.

However, increasing cost of coal, higher pension & financial costs and power-price volatility keep us somewhat concerned.

Other Stocks to Consider

Public Service Enterprise Group is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three industry peers:

IdaCorp, Inc. (IDA - Snapshot Report), with Earnings ESP of +17.65% and a Zacks Rank #2 (Buy).

Northeast Utilities (NU - Analyst Report), with Earnings ESP of +1.96% and a Zacks Rank #2 (Buy).

FirstEnergy Corp. (FE - Analyst Report), with Earnings ESP of +5.66% and a Zacks Rank #3 (Hold).

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