We expect American Water Works Company (AWK - Free Report) to beat expectations when it reports second-quarter 2016 results after the market closes on Aug 3. Last quarter, this fresh water and wastewater service provider reported on par earnings.
Why a Likely Positive Surprise?
Our proven model shows that American Water Works Company is likely to beat estimates because it has the right combination of two key ingredients. 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 and American Water Works Company has the right mix.
Zacks ESP: The Earnings ESP which represents the difference between the Most Accurate estimate of 76 cents and the Zacks Consensus Estimate of 72 cents is +5.56%. This is a meaningful and leading indicator of a likely positive surprise.
Zacks Rank: American Water Works Company currently carries a Zacks Rank #2. The combination of American Water Works’ favorable Zacks Rank and positive ESP makes us reasonably confident of a positive surprise this season.
Conversely, we caution against Sell-rated stocks (#4 or #5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Factors to Consider
In the second quarter, the company completed the acquisition of a few water and wastewater service providers. The inorganic growth strategy continues to work for American Water Works Company, adding new customers and expanding its service territories.
During the quarter, the company continued to invest in its regulated operation to strengthen its existing infrastructure. Positive return from its regulated operation is expected to drive performance in the quarter to be reported.
Other Stocks to Consider
American Water Works Company is not the only utility company looking up this earnings season. We see likely earnings beats coming from these utilities as well:
Exelon Corporation (EXC - Free Report) has an Earnings ESP of +1.79% and a Zacks Rank #3. The company is expected to release second-quarter 2016 results on Aug 9, before the market opens.
Avista Corporation (AVA - Free Report) has an Earnings ESP of +2.33% and a Zacks Rank #2. The company is expected to release second-quarter 2016 results on Aug 3, before the market opens.
National Fuel Gas Company (NFG - Free Report) has an Earnings ESP of +1.59% and a Zacks Rank #2. The company is expected to release third-quarter fiscal 2016 results after the market closes on Aug 4.
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