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American Electric (AEP) Q3 Earnings: A Beat in the Cards?
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American Electric Power Co., Inc. (AEP - Free Report) is set to release third-quarter 2016 results on Nov 1, before the market opens.
In the preceding quarter, this utility company posted a positive earnings surprise of 5.56%. Moreover, American Electric outperformed the Zacks Consensus Estimate in three out of the trailing four quarters, the average positive surprise being 0.95%.
Let’s see how things are shaping up prior to this announcement.
Our proven model shows that American Electric is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: American Electric has an Earnings ESP of +1.67%. That is because the Most Accurate estimate is $1.22 while the Zacks Consensus Estimate is pegged lower at $1.20. This is a meaningful and leading indicator of a likely positive earnings surprise.Please check our Earnings ESP Filterthat enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: American Electric has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Also, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
American Electric has a stable base of approximately 5.4 million customers spread over 11 states, which offers a steady revenue stream and makes up for lower sales in any particular service area.
Following progress in large scale optimization along with the development of additional sales channels that provide growth, American Electric is gradually emerging as an energy company.As an energy company, American Electric is committed toward offering universal access as well as tailored solutions to its customers.
Management is also ramping up investments in solar arrangements to cash in on the untapped opportunities in the growing solar energy market.
Further, the company’s consistent focus on utility operations, transmission growth, expansion of customer sales channels, process optimization and disciplined capital deployment continue to drive results for its shareholders and customers.
Looking forward, for its Ohio Power subsidiary, the company expects to witness a more favorable return on equity (ROE) for 2016, compared to its earlier forecast of 11.9%. We expect the yet-to-be reported quarter’s results to duly reflect the ROE improvement.
Moreover, management believes that success in the company’s regulated business during the second half of 2016 will outweigh challenges presented by its generation and marketing segment. This in turn is expected to enable the company to comfortably acheive its earlier announced earnings target of $3.60–$3.80 per share for 2016.
The Zacks Consensus Estimate is pegged at $1.19 for third-quarter earnings, reflecting year-over-year growth of 12.6%.
On the flip side, the company has been implementing a substantial capital investment program and incurring additional operational costs to comply with environmental control requirements. In fact, in order to meet environmental regulations, the company expects to spend $353.2 million throughout 2016, which being an additional investment, could weigh on its finances.
Stocks to Consider
Here are a few stocks in the Utility space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:
Pattern Energy Group Inc. has an earnings ESP of +16.67% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Nov 7.
Ameren Corporation (AEE - Free Report) has an earnings ESP of +2.90% and a Zacks Rank #2. It is expected to report earnings on Nov 4.
Avista Corp. (AVA - Free Report) has an earnings ESP of +4.76% and a Zacks Rank #2. The company is slated to release results on Nov 1.
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American Electric (AEP) Q3 Earnings: A Beat in the Cards?
American Electric Power Co., Inc. (AEP - Free Report) is set to release third-quarter 2016 results on Nov 1, before the market opens.
In the preceding quarter, this utility company posted a positive earnings surprise of 5.56%. Moreover, American Electric outperformed the Zacks Consensus Estimate in three out of the trailing four quarters, the average positive surprise being 0.95%.
Let’s see how things are shaping up prior to this announcement.
AMER ELEC PWR Price and EPS Surprise
AMER ELEC PWR Price and EPS Surprise | AMER ELEC PWR Quote
Why a Likely Positive Surprise?
Our proven model shows that American Electric is likely to beat earnings because it has the right combination of two key ingredients.
Zacks ESP: American Electric has an Earnings ESP of +1.67%. That is because the Most Accurate estimate is $1.22 while the Zacks Consensus Estimate is pegged lower at $1.20. This is a meaningful and leading indicator of a likely positive earnings surprise.Please check our Earnings ESP Filterthat enables you to find stocks that are expected to come out with earnings surprises.
Zacks Rank: American Electric has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.
Also, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
The combination of American Electric’s Zacks Rank #3 and +1.67% ESP makes us reasonably certain of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.
What’s Driving the Better-Than Expected Earnings?
American Electric has a stable base of approximately 5.4 million customers spread over 11 states, which offers a steady revenue stream and makes up for lower sales in any particular service area.
Following progress in large scale optimization along with the development of additional sales channels that provide growth, American Electric is gradually emerging as an energy company.As an energy company, American Electric is committed toward offering universal access as well as tailored solutions to its customers.
Management is also ramping up investments in solar arrangements to cash in on the untapped opportunities in the growing solar energy market.
Further, the company’s consistent focus on utility operations, transmission growth, expansion of customer sales channels, process optimization and disciplined capital deployment continue to drive results for its shareholders and customers.
Looking forward, for its Ohio Power subsidiary, the company expects to witness a more favorable return on equity (ROE) for 2016, compared to its earlier forecast of 11.9%. We expect the yet-to-be reported quarter’s results to duly reflect the ROE improvement.
Moreover, management believes that success in the company’s regulated business during the second half of 2016 will outweigh challenges presented by its generation and marketing segment. This in turn is expected to enable the company to comfortably acheive its earlier announced earnings target of $3.60–$3.80 per share for 2016.
The Zacks Consensus Estimate is pegged at $1.19 for third-quarter earnings, reflecting year-over-year growth of 12.6%.
On the flip side, the company has been implementing a substantial capital investment program and incurring additional operational costs to comply with environmental control requirements. In fact, in order to meet environmental regulations, the company expects to spend $353.2 million throughout 2016, which being an additional investment, could weigh on its finances.
Stocks to Consider
Here are a few stocks in the Utility space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:
Pattern Energy Group Inc. has an earnings ESP of +16.67% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Nov 7.
Ameren Corporation (AEE - Free Report) has an earnings ESP of +2.90% and a Zacks Rank #2. It is expected to report earnings on Nov 4.
Avista Corp. (AVA - Free Report) has an earnings ESP of +4.76% and a Zacks Rank #2. The company is slated to release results on Nov 1.
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>>