) is scheduled to report its first quarter 2014 earnings on Apr
29, 2014 after the market close. Last quarter, Edison
International beat expectations with an earnings surprise of
21.5%. We expect the trend to continue in the first quarter as
well. Moreover, the company recorded an earnings beat in all the
last four quarters, with an average surprise of 20.55%.
Why a Likely Positive Surprise?
Our proven model shows that this utility company is likely to
beat earnings because it has the right combination of two key
Positive Zacks ESP:
(Expected Surprise Prediction), which represents the difference
between the Most Accurate estimate and the Zacks Consensus
Estimate, is +2.44%. This is a meaningful and leading indicator
of a likely positive earnings surprise for the shares.
Zacks Rank #2 (Buy):
Note that stocks with a Zacks Rank #1, 2 and 3 have a
significantly higher chance of beating earnings estimates. We
caution against stocks with Zacks Ranks #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revision.
The combination of Edison International's Zacks Rank #2 and an
ESP of +2.44% makes us confident of an earnings beat this
What is Driving the Better than Expected
Rosemead, CA-based Edison International, through its
subsidiaries, engages in the supply of electric energy in
central, coastal and southern California. The company's chief
unit - Southern California Edison (SCE) - operates in a
supportive regulatory environment, which would allow the utility
to grow to stronger levels with the improvement of the economic
environment. Through 2017, SCE continues to target 7%-9% average
annual rate base and earnings growth driven by infrastructure
Edison International remains focused on its transmission and
distribution infrastructural development programs. It expects to
spend $15.1 billion to $17.2 billion for the period 2014 to 2017
under its capital investment plan. This plan mainly focuses on
its distribution business, with an allocation of $12.2 billion.
The company's second focus is on its transmission business with a
capital expenditure plan of $4.0 billion that includes
improvement and construction of new transmission lines and
substations for system reliability and increased access to
renewable energy, comprising the Tehachapi, Coolwater-Lugo and
West of Devers transmission and substation projects.
Importantly, in the first quarter 2014, Edison International
settled with California consumer advocates on all issues relating
to the early retirement of SCE's San Onofre nuclear generating
station. Upon successful approval from California Public
Utilities Commission, the utility's only regulatory overhang will
be SCE's pending general rate case.
Stocks to Consider
While we expect Edison International to beat earnings, there are
other utilities also that you may want to consider on the basis
of our model, which shows that they have the right combination of
elements to post an earnings beat this quarter:
NRG Yield, Inc.
), Earnings ESP of +23.53% and Zacks Rank #1 (Strong Buy).
), Earnings ESP of +28.57% and Zacks Rank #2 (Buy).
), Earnings ESP of +6.94% and Zacks Rank #2 (Buy).
CALPINE CORP (CPN): Free Stock Analysis
EDISON INTL (EIX): Free Stock Analysis Report
EXELON CORP (EXC): Free Stock Analysis Report
NRG YIELD INC-A (NYLD): Free Stock Analysis
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