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Is American Electric (AEP) Poised to Beat in Q4 Earnings?

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American Electric Power Company, Inc. (AEP - Free Report) is set to release fourth-quarter and 2018 results on Jan 24, before the market opens. Last quarter, this electric utility company reported a positive earnings surprise of 1.63%.

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

Why a Likely Positive Earnings Surprise

Our proven model shows a beat for American Electric this earnings season. 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.

Earnings ESP: American Electric has an Earnings ESP of +0.35%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Zacks Rank: American Electric carries a Zacks Rank #3, which when combined with a positive ESP makes us confident of a probable earnings beat.

Note that 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.

American Electric Power Company, Inc. Price and EPS Surprise

 

American Electric Power Company, Inc. Price and EPS Surprise | American Electric Power Company, Inc. Quote

Factors at Play

The year 2018 on a whole has turned out to be a strong one for the company’s service territories, backed by favorable tax reforms and a robust job market. This, in turn, should boost demand for electricity, thereby bolstering the company’s top line.

In line with this, the Zacks Consensus Estimate for American Electric’s revenues of $3.96 billion reflects an annual rise of 4.2% in the fourth quarter.

During the third quarter of 2018, income growth within the company’s service territory was 1.5% lower than the rest of the United States. Due to this, residential sales witnessed a decline during the quarter. We expect the slow income growth to continue, and thus have an unfavorable impact on the company’s to-be-reported quarterly earnings.

In line with this, the Zacks Consensus Estimate for the company’s fourth-quarter earnings is pegged at 71 cents, reflecting a 16.5% annual decline.

Other Stocks to Consider

Here are a few other companies in the Utilities sector that have the right combination of elements to post an earnings beat this quarter.

Ameren Corporation (AEE - Free Report) has an Earnings ESP of +2.13% and a Zacks Rank #1. The company is scheduled to report fourth-quarter results on Feb 15. You can see the complete list of today’s Zacks #1 Rank stocks here.

Idacorp, Inc. (IDA - Free Report) has an Earnings ESP of +0.70% and a Zacks Rank #1. The company is expected to release fourth-quarter results on Feb 28.

CMS Energy (CMS - Free Report) has an Earnings ESP of +0.82% and a Zacks Rank #2. The company is scheduled to report third-quarter results on Jan 31.

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