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Will Lower Demand Affect FirstEnergy's (FE) Q3 Earnings?

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FirstEnergy Corporation (FE - Free Report) is scheduled to release third-quarter 2017 results after the closing bellon Oct 26. Last quarter, this utility company earnings broke even. Let’s see how things are shaping up prior to this announcement.

Factors at Play

FirstEnergy expects its third quarter earnings in the range of 75 -90 cents per share, while Zacks Consensus Estimate for the quarter is pegged at 85 cents, reflecting an increase of 11.8% year-over-year.

The company’s modernization drive and its “Energizing the Future” plan will help in upgrading and expanding its transmission capabilities.

FirstEnergy’s competitive business customers at the end of the second quarter were 850,000, much lower than 1.5 million in the year-ago quarter. The drop can be attributed due to the company’s transition from its Competitive Generation to a fully transition to a regulated company. For the third quarter, the Zacks Consensus Estimate for FirstEnergy’s revenue is pegged at $3,571 million much lower than $3,828 million in the year-ago period.

While the ongoing transition has adversely affected FirstEnergy’s customer count, we expect the company’s constant upgradation and modernization efforts to provide some cushion and maintain load growth for the company.

Earnings Whispers

Our proven model does not conclusively show that FirstEnergy is likely to 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 consensus estimates. But that is not the case here, as you will see below.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks ESP: The company’s Earnings ESP is -0.82%.

Zacks Rank: Though FirstEnergy’s Zacks Rank #3 increases the predictive power of the ESP, its negative ESP makes a beat unlikely this season.

Note that 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.

FirstEnergy Corporation Price and EPS Surprise

Stocks to Consider

Instead, here are a few players from the industry that have the right combination of elements to post an earnings beat this quarter.

NiSource, Inc (NI - Free Report) has an Earnings ESP of +7.69%. The company flaunts a Zacks Rank #2 and is anticipatedto report third-quarter 2017 earnings on Nov 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Allete, Inc. (ALE - Free Report) has an Earnings ESP of +2.89%. It carriesZacks Rank #2 and is expected to report third-quarter 2017 earnings on Nov 1.

Pinnacle West Capital Corporation (PNW - Free Report) has an Earnings ESP of +0.14%. It carriesZacks Rank #3 and is expected to report third-quarter 2017 earnings on Nov 3.

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