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We expect diversified utility company Teco Energy Inc. (TE - Analyst Report) to beat expectations when it reports fourth-quarter 2012 results on Feb 5, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Teco Energy is likely to outpace earnings because it has the right combination of two key ingredients, namely, a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #3.

Positive Zacks ESP: ESP which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +14.29%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the shares.

Zacks #3 Rank (Hold): We note that stocks with Zacks Ranks of #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and 5) should never be considered going into an earnings announcement.

The combination of Teco Energy’s Zacks Rank #3 (Hold) and +14.29% ESP makes us confident of an earnings beat on Feb 5.

What is Driving the Better-Than-Expected Earnings?

Teco Energy’s expansion of the customer footprint in Florida and ramp-up in residential construction activity are expected to lend significant upside to the company’s retail sales. This will be supported by a steady improvement in the Florida economy. The proceeds from the divestiture of the Guatemala operations will enable the company to reduce its outstanding debt.

The positive trend was also seen in the 13.51% earnings surprise in the last reported quarter. This was on the back of disciplined cost-control efforts and higher sales from Tampa Electric and Peoples Gas businesses.

Other Stocks to Consider

Teco Energy is not the only company looking up this earnings season. We also see likely earnings beat coming from other utility providers.

Clean Energy Fuels Corp. (CLNE - Snapshot Report), earnings ESP of +87.50% and Zacks Rank #2 (Buy).

Calpine Corp. (CPN - Snapshot Report), earnings ESP of +200.0% and Zacks Rank #2 (Buy).

Entergy Corporation (ETR - Analyst Report), earnings ESP of +17.19% and Zacks Rank #3 (Hold).

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