Electric utility provider Edison International (EIX Quick QuoteEIX - Free Report) is scheduled to report third-quarter 2016 earnings results on Nov 1, after the market closes. Last quarter, the company posted a negative earnings surprise of 15%. Let’s see how things are shaping up for this quarter.

Factors at Play

Edison International’s chief unit, Southern California Edison (“SCE”), operates in a supportive regulatory environment that allows the utility to grow systematically. The company is also implementing infrastructure improvement programs like SmartConnect and Solar Photovoltaic Program that focus mainly on system reliability, smart grid technology and compliance with California's renewable energy mandate. For this year, the company expects SCE to post the strongest results in the third quarter.

During the second-quarter earnings call, Edison International said that authorized revenue reductions from the 2015 General Rate Case (“GRC”) decision were not reflected in its results for the first or second quarter of 2016. They will be reflected in the third- and fourth-quarter results.

Weather too will play an important role during the to-be-reported quarter. The company’s service territories have witnessed above-average temperatures during the third quarter, which should boost the demand for utility services and thus, drive the top line.

However, Edison International’s operations are subject to complex federal, state and local legislative requirements, as well as extensive environmental regulations. The company generates more than 80% of its revenues from regulated utility assets. Hence, its earnings are dependent on approvals from regulatory bodies and any adverse ruling could impact its performance.

Overall, for the third quarter, the Zacks Consensus Estimate for earnings stands at $1.31, reflecting a year-over-year increase of 12.5%, while that for revenues is pegged at $3.84 billion, translating into a 12% growth.

Earnings Whispers

Our proven model does not conclusively show that Edison International will beat earnings this quarter. That is because 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. But that is not the case here, as you will see below.

Zacks ESP: Edison International has an Earnings ESP of 0.00%. This is because the Most Accurate estimate of $1.31 stands in line with the Zacks Consensus Estimate. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Though Edison International’s Zacks Rank #3 increases the predictive power of ESP, its Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks in the utility-electric power space that you may want to consider, as our model shows that they have the right combination of elements to post an earnings beat this season:

Pattern Energy Group Inc. is expected to release third-quarter results on Nov 3. The company has an Earnings ESP of +16.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AES Corporation (AES Quick QuoteAES - Free Report) has an Earnings ESP of +5.88% and a Zacks Rank #3. It is expected to report earnings on Nov 4.

Hawaiian Electric Industries Inc. (HE Quick QuoteHE - Free Report) has an Earnings ESP of +2.04% and a Zacks Rank #3. The company is expected to release third-quarter 2016 earnings on Nov 4.

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