Can The Laclede Group (LG) Surprise This Earnings Season? - Analyst Blog


Gas utility The Laclede Group Inc. ( LG ) is set to release its third quarter fiscal 2014 results before the opening bell on Thursday, Aug 7.

In the preceding three-month period, The Laclede Group delivered a positive 27.4% earnings surprise - the second outperformance in the last 4 quarters - aided by extreme cold weather conditions that boosted natural gas' demand for heating. Let's see how things are shaping up for this announcement.

Factors to Consider This Quarter

Positioned in a niche industry with high barriers to entry, this energy services holding company enjoys a strong competitive position in its area of operation. On top of this, the utility's recession-proof business model presents additional growth opportunities for The Laclede Group, which is in the process of acquiring Alabama Gas Corp. from Energen Corp. ( EGN ) for $1.6 billion.

However, operating results for The Laclede Group are affected by weather conditions and may vary on a seasonal and quarterly basis. Usually, almost 75% of the deliveries and sales occur during the six-month period of October to March. Thus, the second-quarter results are likely to be softer. The utility's below-average new customer addition growth in its service territory is also expected to play spoilsport. 

Earnings Whispers?

Our proven model does not conclusively show that The Laclede Group is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. Unfortunately, this is not the case here, as elaborated below.

Zacks ESP: The Laclede Group's earnings ESP is 0.00%, as the Most Accurate estimate and the Zacks Consensus Estimate both stand at 35 cents.

Zacks Rank: The Laclede Group carries a Zacks Rank #2 (Buy). Though a favorable Zacks Rank increases the predictive power of ESP, the company's ESP of 0.0% makes surprise prediction difficult.

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 revisions momentum.

Stocks to Consider

While earnings beat looks uncertain for The Laclede Group, here are some companies 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:

Consolidated Edison Inc. ( ED ) has an Earnings ESP of +9.26% and holds a Zacks Rank #2.

Crescent Point Energy Corp. ( CPG ) has an Earnings ESP of +28.21% and holds a Zacks Rank #2.

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LACLEDE GRP INC (LG): Free Stock Analysis Report

CRESCENT PT EGY (CPG): Free Stock Analysis Report

CONSOL EDISON (ED): Free Stock Analysis Report

ENERGEN CORP (EGN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: LG , CPG , ED , EGN

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