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Is a Beat in Store for Entergy (ETR) this Earnings Season?

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Entergy Corporation (ETR - Free Report) will release second-quarter 2017 financial numbers on Aug 2, before the opening bell.

Last quarter, the company witnessed a negative earnings surprise of 6.60%. Let’s see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Entergy is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), which have a significantly higher chance of beating earnings.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is +0.83%. This is because the Most Accurate estimate is at $1.21, while the Zacks Consensus Estimate is pegged slightly lower at $1.20. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Entergy currently has a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

Note that we caution against stocks with Zacks Ranks #4 or 5 (Sell rated) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Factors at Play

During the first-quarter earnings call, Entergy had said that it expects continued growth in industrial sales in 2017 driven by new and expansion projects. Consequently, it is expected that industrial sales will witness growth in the to-be-reported quarter.

Again, the company's service territories witnessed above-average temperatures during the quarter. This should in fact lead to increased electric sales in these regions, which in turn, is expected to boost the top line.

On the flip side, Entergy had earlier said that in the first half of 2017 sales at the existing petroleum refiners are projected to decline year over year due to anticipated customer outages. This, in turn, will negatively impact the company’s second-quarter results.

For the quarter, the Zacks Consensus Estimate for earnings reflects a decline of 61.3%, on revenues of $2.44 billion, implying a year-over-year decrease of 0.8%.

Other Stocks to Consider

Here are a few other operators in the electric utility space worth considering, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

NiSource, Inc. (NI - Free Report) will report second-quarter results on Aug 2. The company has an Earnings ESP of +10.00% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pattern Energy Group, Inc. (PEGI - Free Report) has an Earnings ESP of +23.08% and a Zacks Rank #2. The company is expected to report second-quarter results on Aug 4.

Pinnacle West Capital Corporation (PNW - Free Report) has an Earnings ESP of +4.31% and a Zacks Rank #3. The company is slated to release second-quarter results on Aug 3.

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