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Can AGL Resources (GAS) Earnings Pull a Surprise in Q3?

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AGL Resources Inc is expected to report third-quarter 2015 results on Nov 9.

The energy services holding player’s average earnings surprise during the last four quarters came at negative 10.50%. Let’s see how things are shaping up during this earnings season.   

Factors to Consider This Quarter

AGL Resources has a relatively low-risk earnings growth profile. Positioned in a niche industry with high barriers to entry, this energy services holding company enjoys a near-monopoly status in its area of operations. The company also has a large and stable customer profile, and a strong liquidity position that are likely to have benefited its business in the quarter under review.

Moreover, there is a growing need for electricity generation with the constant rise in population. Since the main business of the company is distributing natural gas – used for generating electricity – this might be a profitable quarter for AGL Resources.   

It will be interesting to see whether the events drive up better-than-expected results.

What Our Model Indicates

Our proven model does not conclusively show that AGL Resources is likely to beat estimates 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 estimates. That is not the case here as you will see below.  

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 20 cents.

Zacks Rank: AGL Resources has a Zacks Rank #3, which increases the predictive power of ESP. But we need a positive ESP to be confident of a beat. 

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are some companies in the energy sector with the right combination of elements to post an earnings beat this quarter:

EV Energy Partners LP with an Earnings ESP of + 27.27% and a Zacks Rank #3. The partnership is anticipated to release earnings results on Nov 9.

Warren Resources Inc. has an Earnings ESP of + 9.09% and a Zacks Rank #3. The company is likely to release earnings results on Nov 9.  

Seadrill Partners LLC has an Earnings ESP of +12.00% and a Zacks Rank #1. The partnership is expected to release earnings results on Nov 25.

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