DTE Energy Company
) is set to report second-quarter 2014 results before the market
opens on Jul 25. In the last quarter, the company delivered a
positive 19.86% earnings surprise. Let's see how things are shaping
up for this announcement.
Factors to Consider This Quarter
DTE Energy continues to diversify its power generation mix by
expanding the renewable asset base. Recently, the Obama
administration rolled out its plan to curb carbon emissions from
power plants by 30% by 2030. The rule is expected to come into
effect next year. Hence, the company is investing substantially to
construct and upgrade its renewable utility infrastructure to
comply with stricter regulations.
In June, the company acquired the 75-megawatt Pheasant Run II wind
park from a unit of
NextEra Energy, Inc.
). In Mar 2014, DTE Energy completed a construction project related
to the conversion of a closed coal-fired power plant to a biomass
operation. The company plans to invest around $1.1 billion within a
time span of 2008 to 2015. The scheduled completion of these
ventures will enable DTE Energy to achieve the state of Michigan's
renewable goal of 10% by 2015.
True to the defensive nature of all utilities, DTE Energy pays
regular dividends. In Jun 2014, the DTE board approved a 5.3%
increase in its quarterly dividend rate from the previous payout.
We are, however, a little apprehensive of escalating fuel,
purchased power and gas expenses. In the first quarter though these
expenses had shot up 60% year over year, a frigid winter driving
energy demand had ensured that the company's net profits remained
unaffected. We are not too confident of how far DTE will be
able to mitigate elevated costs in the second quarter considering
the mild temperatures this season.
Our proven model does not conclusively show that DTE Energy will
beat earnings this quarter. That is because a stock needs to have
both a positive
and a Zacks Rank #1, 2 or 3 for this to happen. That is not the
case here as you will see below.
The Earnings ESP, which represents the difference between the Most
Accurate Estimate and the Zacks Consensus Estimate, is +1.33%. This
is because the Most Accurate estimate stands at 76 cents while the
Zacks Consensus Estimate is pegged at 75 cents.
DTE Energy's Zacks Rank #4 (Sell) lowers the predictive power of
the ESP. We caution against stocks with Zacks Rank #4 and 5
(Sell-rated stocks) going into the earnings announcement,
especially when the company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some utility companies worth considering as our model
shows they have the right combination of elements to post an
earnings beat this quarter.
) has an earnings ESP of +14.04% and carries a Zacks Rank #2 (Buy).
American Electric Power Company, Inc.
) has an earnings ESP of +2.67% and carries a Zacks Rank #2 (Buy).
TECO Energy, Inc.
) has an earnings ESP of +3.70% and carries a Zacks Rank #2
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DTE ENERGY CO (DTE): Free Stock Analysis Report
AMEREN CORP (AEE): Free Stock Analysis Report
TECO ENERGY (TE): Free Stock Analysis Report
AMER ELEC PWR (AEP): Free Stock Analysis Report
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