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We expect utility company Calpine Corporation (CPN - Snapshot Report) to beat expectations when it reports fourth-quarter 2012 results on Feb 13, 2013.

Why a Likely Positive Surprise?

Our proven model shows that Calpine Corporation is likely to beat earnings because it has the right combination of key factors.

Positive Zacks ESP: Expected Surprise Prediction or ESP (Read: Zacks Earnings ESP: A Better Method), which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +100.00%. This is meaningful and a leading indicator of a likely positive earnings surprise for this company.

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 Calpine Corporation’s Zacks Rank #3 (Hold) and +100.00% ESP makes us confident of a positive earnings beat this announcement.

Earnings Drivers

Calpine Corporation’s steady capital investment program in several growth projects along with divesture of non-performing assets, portfolio realignment and cost-curtailment initiatives are expected to drive earnings.

The company continues to restructure its generation portfolio by hiving off assets and adding new properties. Calpine Corporation received $392 million in 2012 by selling its Riverside Energy Center to a unit of Alliant Energy Corporation (LNT - Snapshot Report). We expect these transactions along with an 800-megawatt Californian growth project to help Calpine Corporation meet the growing demand from Texas and Delaware.

The positive trend is seen in the trailing four quarter average surprise of 42.96%. Calpine Corporation’s third-quarter 2012 surprise was 9.52%. Benefits from acquisitions, asset realignment and a strong cash position aided the surprise.

Other Stocks to Consider

Calpine Corporation is not the only organization looking up this earnings season. We also expect other utility providers to beat earnings.

Ormat Technologies Inc. (ORA - Snapshot Report), earnings ESP of +50.00% and Zacks Rank #2 (Buy).

PPL Corporation (PPL - Analyst Report), earnings ESP of +2.17% and Zacks Rank #3 (Hold).

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