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Entergy (ETR) to Report Q1 Earnings: What's in the Cards?

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Entergy Corporation (ETR - Free Report) will release first-quarter 2018 results on Apr 25, before the opening bell.

Last quarter, the company delivered a positive earnings surprise of 90.95%. Also, Entergy surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 60.21%.

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

Factors at Play

In the first quarter, most of the company's service territories witnessed warmer-than-normal winters. This indicates reduced demand for electricity in these regions, which in turn, is expected to weigh on Entergy's first-quarter sales.

Moreover, management expects the company’s Entergy Wholesale Commodity (EWC) segment to post lower net revenues throughout 2018. The downside can be attributed to lower energy prices, increased non-fuel operations and maintenance expenses on account of higher projected nuclear spending. We believe the upcoming results to reflect this trend, which in turn, is likely to be a drag on the company’s total revenues. In sync with this, the Zacks Consensus Estimate of $2.46 billion for Entergy’s first-quarter sales reflects a year-over-year decline of 5.1%.

On the bottom-line front, corporate income tax expense courtesy of the Tax Cut and Jobs Act is expected to boost Entergy’s earnings growth, in the first-quarter. Considering this, the Zacks Consensus Estimate for Entergy’s first-quarter earnings of $1.31 per share reflects annual growth of 32.3%.

In November 2017, Entergy Mississippi filed its redetermination of the annual factor to be applied under the energy cost recovery rider. The calculation of the annual factor included an under-recovery of approximately $61.5 million as of September 30, 2017. In January 2018, the Michigan Public Service Commission approved the proposed energy cost factors effective for February 2018 bills. So, a part of this $62 million will positively impact the company’s first quarter results.

On the flip side, higher fuel costs are expected to weigh heavily on the company’s results in the yet-to-be reported quarter. The increase in fuel costs can be attributed to rise in nuclear spending that Entergy expects to incur in relation to its nuclear strategic plan like continuing operation of the Palisades plant through 2022.

Earnings Whispers

Our proven model does not show that Entergy is likely to beat earnings this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here, as you will see below.

Zacks ESP: Entergy has an Earnings ESP of -0.96%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Entergy sports a Zacks Rank #1, which increases the possibility of an earnings beat. However, the company’s negative Earnings ESP makes surprise prediction difficult.

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

Other Stocks to Consider

Here are a few operators in the Utility space that you may consider, as our model shows that they have the right combination of elements to deliver an earnings beat this quarter:

CMS Energy (CMS - Free Report) has an Earnings ESP of +2.08% and a Zacks Rank #2. The company is scheduled to report first-quarter results on Apr 26. You can see the complete list of today’s Zacks #1 Rank stocks here.

CenterPoint Energy (CNP - Free Report) has an Earnings ESP of +0.59% and a Zacks Rank #1. The company is scheduled to report first-quarter results on May 4.

The AES Corp. (AES - Free Report) has an Earnings ESP of +10.20% and a Zacks Rank #2. The company is scheduled to report first-quarter results on May 8.

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