We expect utility company
) to beat expectations when it reports second-quarter 2013
results before the market opens on Aug 6, 2013.
Why a Likely Positive Surprise?
Our proven model shows that FirstEnergy is likely to beat
earnings because it has the right combination of key factors.
Positive Zacks ESP:
Expected Surprise Prediction or ESP (Read:
Zacks Earnings ESP: A Better Method
), which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is +3.85%. This is
meaningful and a leading indicator of a likely positive earnings
surprise for this company.
Zacks #3 Rank (Hold):
The stocks with Zacks Ranks of #1, 2 and 3 have a significantly
higher chance of beating earnings. The Sell rated stocks (#4 and
5) should never be considered going into an earnings
The combination of FirstEnergy's Zacks Rank #3 (Hold) and +3.85%
ESP make us confident of a positive earnings beat on Aug 6.
What is Driving Better-than-Expected Earnings?
FirstEnergy is following a strategy to shift its focus to higher
value retail channels from the Provider of Last Resort Plan
(POLR) as there is continuous growth in retail customer coverage.
Since Mar 2012, the company's retail customer coverage expanded
by 42%. We believe FirstEnergy's retail business will maintain an
upward movement in the near term.
In first-quarter 2013, FirstEnergy has already experienced
positive outcome out of the changes in strategy. This initiative
continues to help the company to manage weak market price
conditions along with achieving targeted sales of 104 million
megawatt-hours (MWh) in 2013.
In addition, FirstEnergy is in the middle of numerous
infrastructure modernization projects to enhance power service
quality, which will subsequently retain customers. Further, these
initiatives are expected to aid in attracting new customers,
thereby increasing the customer portfolio while improving future
Other Stocks to Consider
FirstEnergy is not the only organization looking up this earnings
season. We see other utility players, which are likely to beat
NRG Energy, Inc.
), Earnings ESP of +24.24% and Zacks Rank #2 (Buy).
Great Plains Energy Incorporated
), Earnings ESP of + 2.56% and Zacks Rank #3 (Hold).
El Paso Electric Company
), Earnings ESP of +1.39% and Zacks Rank #3 (Hold).
EL PASO ELEC CO (EE): Free Stock Analysis
FIRSTENERGY CP (FE): Free Stock Analysis
GREAT PLAINS EN (GXP): Free Stock Analysis
NRG ENERGY INC (NRG): Free Stock Analysis
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