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We expect diversified utility company Wisconsin Energy Corporation (WEC - Analyst Report) to beat expectations when it reports third-quarter 2013 results on Oct 30, 2013.

Why a Likely Positive Surprise?

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

Positive Zacks ESP: Earnings ESP (Expected Surprise Prediction), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.79%. This is meaningful and a leading indicator of a likely positive earnings surprise for this company.

Zacks #2 Rank (Buy): We 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 while going into an earnings announcement.

The combination of Wisconsin Energy’s Zacks Rank #2 (Buy) and +1.79% ESP make us confident of a positive earnings beat on Oct 30.

What is Driving the Better-than-Expected Earnings?

We appreciate Wisconsin Energy’s effort toward upgrading existing infrastructure while adding new assets. The company continuously invests substantial amounts to improve its aging distribution infrastructure, constructing blocks and installing pipes and poles. These initiatives will enable the company to provide uninterrupted services to its customers, thereby improving reliability.

We expect demand for utility to improve in the upcoming quarters, on the heels of gradual improvement at the state of Wisconsin’s economy, drop in unemployment rate and customer switching to natural gas from propane. In addition, increase in customer counts will also help Wisconsin Energy to improve its performance.

Wisconsin Energy has completed a 10-year “Power the Future” plan. These initiatives will help the company to generate adequate electricity to meet the growing demand for power in its service areas, that reflected in its last four earnings beat with an average earnings surprise of 10.03%. We expect this initiative will continue to benefit the company and its positive effects will reflect in the results of the company.

Other Stocks to Consider

Wisconsin Energy is not the only company looking up this earnings season. We also see likely earnings beat coming from other utility providers.

Alliant Energy Corp. (LNT - Snapshot Report), Earnings ESP of +4.55% and Zacks Rank #2 (Buy).

Cleco Corp. (CNL - Snapshot Report), Earnings ESP of +1.91% and Zacks Rank #2 (Buy).

Exelon Corp. (EXC - Analyst Report), Earnings ESP of +1.49% and Zacks Rank #3 (Hold).

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