Back to top

Analyst Blog

American Electric Power Co., Inc. (AEP - Analyst Report) will release its first quarter 2014 financial results before the market bell on Apr 25, 2014. This energy company registered a positive earnings surprise last quarter. We expect the company to beat again this quarter.

Why a Likely Positive Surprise?

Our proven model shows that American Electric Power is likely to beat earnings because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is the case here.

Positive Zacks ESP: This is because the Most Accurate estimate stands at 95 cents while the Zacks Consensus Estimate is 91 cents , resulting in +4.40% ESP. This is a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank #3 (Hold): American Electric Power’s Zacks Rank #3 combined with a positive ESP increases the possibility of an earnings beat. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

What is Driving the Better-than-Expected Earnings?

2013 was a profitable year for American Electric Power and it expects to improve upon its performance this year. The ongoing investments in transmission projects and in regulated as well as non-regulated businesses are set to drive this utility’s earnings.

American Electric Power is also focused on expanding its line of businesses. In Feb 2014, its unit AEP River Operations started a new Liquids Division with the receipt of the first of 20 tank barges. The company will transport liquid commodities, including petrochemicals and agricultural chemicals, which will definitely boost its profits.

In addition, heightened industrial activity in its service territories is expected to drive an additional 270 megawatt of fresh demand. This will to a large extent compensate for the loss of Ormet, an aluminum smelter in Ohio, which shut down in October last year.

Other Stocks to Consider

Here are some other companies tied to the electric utility industry worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.

Wisconsin Energy Corp. (WEC - Analyst Report) has an earnings ESP of +2.41% and carries a Zacks Rank #2 (Buy).

Calpine Corp. (CPN - Snapshot Report) has an earnings ESP of +16.67% and carries a Zacks Rank #2 (Buy).

Ameren Corporation (AEE - Analyst Report) has an earnings ESP of +6.25% and carries a Zacks Rank #2 (Buy).

Read the Full Research Report on AEE
Read the Full Research Report on AEP
Read the Full Research Report on WEC
Read the Full Research Report on CPN


Zacks Investment Research

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%