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We expect utility service provider Xcel Energy Inc. (XEL - Analyst Report) to surpass our expectations when it reports third quarter 2013 earnings results before the market bell on Oct 24.

Why a Likely Positive Surprise?

Our proven model shows that Xcel Energy is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: The Earnings ESP (Expected Surprise Prediction), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +1.32%. This is a meaningful and leading indicator of a likely positive earnings surprise for shares.

Zacks Rank #3 (Hold): The company currently retains a 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 Xcel Energy’s Zacks Rank #3 and +1.32% ESP makes us confident of an earnings beat this quarter.

What is Driving the Better-than-Expected Earnings?

Xcel Energy delivered straight earnings surprises in the last four quarters with an average beat of 7.20%. We believe the company will maintain its earnings streak on the back of positive rate changes in Colorado, Wisconsin, South Dakota and Texas businesses.

In addition, the service initiation of Xcel Energy’s Monticello nuclear plant after the outage is anticipated to boost operations. The currently favorable renewable climate in the U.S. will also support the company’s unrelenting green energy expansion efforts. Furthermore, Xcel Energy is poised to benefit from the progress of its CapX2020 transmission project.

Other Stocks to Consider

Xcel Energy is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three industry peers:

Alliant Energy Corp. (LNT - Snapshot Report) has an earnings ESP of +4.55% and carries a Zacks Rank #2 (Buy).

Cleco Corp. (CNL - Snapshot Report) has an earnings ESP of +1.91% and carries a Zacks Rank #2 (Buy).

Great Plains Energy Inc. (GXP - Snapshot Report) has an earnings ESP of +3.26% and carries a Zacks Rank #2 (Buy).

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