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NextEra Energy (NEE) Q2 Earnings: Stock to Disappoint?
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Diversified utility NextEra Energy Inc. (NEE - Free Report) is scheduled to report second-quarter 2016 results on Jul 27, before the market opens. Last quarter, the company has reported a positive earnings surprise of 12.32%. Let’s see how things are shaping up for this quarter.
Factors to Consider
NextEra Energy has nuclear generation assets, the operation and maintenance of which, as per government regulations, involve heavy expenses. This can undermine NextEra Energy’s profitability to a large extent.
We note that divestment of the Lamar and Forney natural gas generation assets was closed right after the end of the first quarter. The transaction generated net cash proceeds of nearly $456 million and a net after-tax gain on dispositions of nearly $107 million. However, these amounts will be excluded from NextEra Energy's second-quarter adjusted earnings.
On the positive sides, the ongoing improvement in Florida’s economy is resulting in declining unemployment and increasing housing permits, which has created fresh demand for utility services. The resultant benefits are expected to continue in the second quarter as well. Aggressive renewable expansion measures are also expected to drive growth at the company.
The above chart indicates that NextEra Energy was able to generate positive earnings surprises thrice in the four trailing quarters. The average positive surprise was 4.82%.
Earnings Whispers
Our proven model does not conclusively show that NextEra Energy will 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) for this to happen. But 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 -3.87%. This is because the Most Accurate estimate stands at $1.49, while the Zacks Consensus Estimate is pegged at $1.55.
Zacks Rank: Though NextEra Energy’s Zacks Rank #3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a few operators in the utility-electric power sector worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:
NRG Energy, Inc. (NRG - Free Report) has an Earnings ESP of +228.00% and a Zacks Rank #2. The company is expected to report second-quarter 2016 results on Aug 2.
Pattern Energy Group, Inc. has an Earnings ESP of +100.00% and a Zacks Rank #2. The company is expected to report second-quarter 2016 results on Aug 8.
Avista Corp. (AVA - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #2. The company is expected to report second-quarter 2016 results on Aug 3, before the market opens.
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NextEra Energy (NEE) Q2 Earnings: Stock to Disappoint?
Diversified utility NextEra Energy Inc. (NEE - Free Report) is scheduled to report second-quarter 2016 results on Jul 27, before the market opens. Last quarter, the company has reported a positive earnings surprise of 12.32%. Let’s see how things are shaping up for this quarter.
Factors to Consider
NextEra Energy has nuclear generation assets, the operation and maintenance of which, as per government regulations, involve heavy expenses. This can undermine NextEra Energy’s profitability to a large extent.
We note that divestment of the Lamar and Forney natural gas generation assets was closed right after the end of the first quarter. The transaction generated net cash proceeds of nearly $456 million and a net after-tax gain on dispositions of nearly $107 million. However, these amounts will be excluded from NextEra Energy's second-quarter adjusted earnings.
On the positive sides, the ongoing improvement in Florida’s economy is resulting in declining unemployment and increasing housing permits, which has created fresh demand for utility services. The resultant benefits are expected to continue in the second quarter as well. Aggressive renewable expansion measures are also expected to drive growth at the company.
Surprise History
NEXTERA ENERGY Price and EPS Surprise
NEXTERA ENERGY Price and EPS Surprise | NEXTERA ENERGY Quote
The above chart indicates that NextEra Energy was able to generate positive earnings surprises thrice in the four trailing quarters. The average positive surprise was 4.82%.
Earnings Whispers
Our proven model does not conclusively show that NextEra Energy will 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) for this to happen. But 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 -3.87%. This is because the Most Accurate estimate stands at $1.49, while the Zacks Consensus Estimate is pegged at $1.55.
Zacks Rank: Though NextEra Energy’s Zacks Rank #3 increases the predictive power of ESP, the company’s negative ESP makes surprise prediction difficult.
Note that we caution against stocks with a Zacks Ranks #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a few operators in the utility-electric power sector worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter:
NRG Energy, Inc. (NRG - Free Report) has an Earnings ESP of +228.00% and a Zacks Rank #2. The company is expected to report second-quarter 2016 results on Aug 2.
Pattern Energy Group, Inc. has an Earnings ESP of +100.00% and a Zacks Rank #2. The company is expected to report second-quarter 2016 results on Aug 8.
Avista Corp. (AVA - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #2. The company is expected to report second-quarter 2016 results on Aug 3, before the market opens.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>