Back to top

Image: Bigstock

FirstEnergy (FE) Q3 Earnings: Stock to Post a Beat Again?

Read MoreHide Full Article

We expect FirstEnergy Corp. (FE - Free Report) to beat estimates when it reports third-quarter 2016 results on Nov 4, before the opening bell.

Last quarter, the company posted a 5.66% positive earnings surprise, with a four-quarter average of a positive 5.93%. Let’s see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that FirstEnergy is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +2.63%. This is because the Most Accurate Estimate is pegged at 78 cents while the Zacks Consensus Estimate stands lower at 76 cents. This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

FIRSTENERGY CP Price and EPS Surprise

 

FIRSTENERGY CP Price and EPS Surprise | FIRSTENERGY CP Quote

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: FirstEnergy currently carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1 (Strong Buy), #2 (Buy) and #3 have a significantly higher chance of beating earnings. Sell-rated stocks (#4 or #5), on the other hand, should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

The combination of FirstEnergy’s favorable Zacks Rank and positive ESP makes us reasonably confident of an earnings beat this season.

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

At its competitive business, FirstEnergy has 64 million megawatt-hours (“Mwh”) committed sales for 2016, thereby providing visibility to third-quarter revenues.

Moreover, above-average temperatures during the third quarter in FirstEnergy’s service territories are expected to support its top line.

Further, third-quarter results are expected to be positively impacted by one less nuclear outage and the benefit of the cash flow improvement program.

On the flip side, residential and commercial electricity sales are expected to be lower in 2016 on a year-over-year basis, primarily driven by increased adoption of energy-efficient technology. Additionally, industrial demand of electricity is expected to be flat or slightly lower than last year as growth in the shale sector is offset by steel industry slowdown.

Peer Releases

FirstEnergy is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three industry peers.

Ameren Corporation (AEE - Free Report) has an Earnings ESP of +2.90% and a Zacks Rank #2. It is scheduled to report earnings on Nov 4. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sempra Energy (SRE - Free Report) has an Earnings ESP of +2.06% and a Zacks Rank #3. It is expected to report earnings on Nov 2.

NRG Energy, Inc. (NRG - Free Report) has an earnings ESP of +4.55% and a Zacks Rank #3. It is slated to report earnings on Nov 4.

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>>

Published in