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We expect PG&E Corp. (PCG - Analyst Report) to beat expectations when it reports fourth quarter 2012 results on Feb 21, 2013.

Why a Likely Positive Surprise?

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

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 +1.75%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the shares.

Zacks #3 Rank (Hold): PG&E Corp.’s Zacks Rank #3 (Hold) when combined with a positive earnings ESP increases the chance of beating earnings.

The combination of PG&E Corp.’s Zacks Rank #3 (Hold) and 1.75% ESP makes us confident of a positive earnings beat on Feb 21, 2013.

What is Driving Better than Expected Earnings?

PG&E Corp. has a solid portfolio of regulated utility assets that offer a stable earnings base and substantial long-term growth potential. Moreover, the company’s strong balance sheet and cash flows provide substantial financial flexibility and cushion against the currently challenging business environment. Going forward, favorable decisions from regulators, long-term supply contracts, diversification into alternative power sources, a continuous dividend paying strategy and infrastructure improvement programs bode well for the company.

The positive trend is seen in the trailing four-quarter average surprise of 8.78%, greatly helped by the 5.68% surprise in the last reported quarter. This was possible because of the company’s strategy of optimizing generation margins by improving its cost structure, performance and reliability of its nuclear as well as fossil units.

Other Stocks to Consider

PG&E Corp. is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three industry peers:

NV Energy, Inc. , earnings ESP of +14.29% and Zacks #3 Rank (Hold)

Dynegy Inc. (DYN - Snapshot Report), earnings ESP of +75% and Zacks #3 Rank (Hold).

ONEOK Partners, L.P. (OKS - Analyst Report), earnings ESP of +3.08% and Zacks #3 Rank (Hold).

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