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CenterPoint Energy (CNP) Q2 Earnings: A Surprise in Store?

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CenterPoint Energy, Inc. (CNP - Free Report) will release second-quarter 2017 financial results before the market opens on Aug 3.

In the prior quarter, the company reported a positive earnings surprise of 2.78%. However, CenterPoint underperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average negative earnings surprise of 2.94%.

Let’s see how things are shaping up for the company prior to this announcement.

Factors at Play

CenterPoint witnessed increased customer count and throughput during first-quarter 2017, primarily due to acquisitions of Atmos Energy Marketing (AEM) and the Energy Services business. Going ahead, similar solid performance from Energy Services is expected in second quarter and beyond, buoyed by increased operating income. Also, the AEM acquisition is likely to be modestly accretive this year, even after accounting for integration expenses. We expect to receive further updates on these once the company releases its second-quarter results.

The company's service territories witnessed more or less warmer-than-normal temperatures during the second quarter. This will result in higher household expenditure on cooling, which might boost its revenues in the to-be-reported quarter.

However, in the second quarter, a handful of tornados and thunderstorms hit Texas. With the state being the primary service region for CenterPoint, it exposed the company’s utility plants to damage and consequent expenditures. Any damage to these plants by these storms might weigh down on the company’s profitability in the second quarter.

For the second quarter, the Zacks Consensus Estimate for earnings projects an improvement of 15.6%, while the consensus for revenues hints at an improvement of almost 13.75% on a year-over-year basis.

Earnings Whispers

Our proven model does not conclusively show that CenterPoint is likely to beat earnings this quarter. This 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. This is not the case here, as you will see below.

Zacks ESP: CenterPoint has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 20 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CenterPoint carries a Zacks Rank #3, which increases the predictive power of ESP. However, the Earnings ESP of 0.00% makes surprise prediction difficult.

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

Stocks that Warrant a Look

Here are a few stocks in the Utility space, which 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 8.

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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