Back to top

Image: Bigstock

DTE Energy (DTE) to Report Q3 Earnings: Stock to Beat?

Read MoreHide Full Article

DTE Energy (DTE - Free Report) will release third-quarter 2016 financial results before the market opens on Oct 26. In the prior quarter, the company posted a positive earnings surprise of 8.89%. In the four trailing quarters, it beat the Zacks Consensus Estimate thrice, with an average positive surprise of 6.94%.

Let’s see how things are shaping up at the company prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that DTE Energy is likely to beat earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to be able to beat estimates, and DTE Energy has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.64%. This is because the Most Accurate estimate stands at $1.58, while the Zacks Consensus Estimate is pegged slightly lower at $1.51. This is a meaningful indicator of a likely positive earnings surprise.

Zacks Rank: DTE Energy’s Zacks Rank #2, when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

Conversely, Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

DTE ENERGY CO Price and EPS Surprise

 

DTE ENERGY CO Price and EPS Surprise | DTE ENERGY CO Quote

What’s Driving the Better-than-Expected Earnings?

DTE Energy expects $2,500−2,700 million of capital outlay in 2016, comprising $1,550 million for DTE Electric, $430 million for DTE Gas and $520–720 million for DTE Non-Utility. Planned investments in regulated electric and gas infrastructure in Michigan, and expansion of the company’s existing pipelines as well as the development of the NEXUS pipeline will help it attain year-over-year earnings growth of 5% to 6% in 2016.

During the second-quarter earnings call, the company raised its operating earnings per share guidance for 2016 to the range of $4.91–$5.19 from the prior range of $4.80–$5.05. The increase was driven by solid performance of its Electric business, and Gas Storage & Pipelines business, as well as robust first-half results of the Energy Trading operations. This trend is expected to continue in the third quarter too.

The company's service territories witnessed above-average temperatures during the third quarter. This should lead to increased electric sales in these regions, which in turn, will boost the top line.

Overall, for the third quarter, the Zacks Consensus Estimate for earnings stands at $1.51, reflecting an 8.1% year-over-year increase.

Other Stocks to Consider

Here are a few other players in the utility space, which also have the right combination of elements to post an earnings beat this quarter:

Pattern Energy Group Inc. has an Earnings ESP of +16.67% and a Zacks Rank #2. The company is expected to release third-quarter results on Nov 3.

Entergy Corporation (ETR - Free Report) has an Earnings ESP of +8.06% and a Zacks Rank #2. It is expected to report earnings on Oct 25.

CMS Energy Corp. (CMS - Free Report) will report second-quarter results on Oct 27. The company has an Earnings ESP of +5.26% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>


See More Zacks Research for These Tickers


Normally $25 each - click below to receive one report FREE:


Entergy Corporation (ETR) - free report >>

DTE Energy Company (DTE) - free report >>

CMS Energy Corporation (CMS) - free report >>

Published in