NRG Energy Inc.
) is set to report its fourth-quarter 2012 results on Feb 27.
Last quarter, the company reported a 52.83% negative surprise.
Let's see how things are shaping up prior to this release.
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Factors to Consider This Quarter
We believe the combined negative impact from fuel price
volatility, stringent regulatory compliances and over-reliance on
weather conditions may challenge the near-term results of the
Performance of the utility providers primarily depends on weather
patterns of the region. Periods of volatile weather conditions
not only affect demand, but can cause interruptions in coal
production and transportation, especially in harsh conditions.
Such situations increase operating expenses of the utility
providers, and NRG Energy is no exception.
In addition, NRG Energy relies heavily on other parties for the
wholesale transmission of power. Lack of modernization in
transmission infrastructure and transmission price regulations
could restrict the company's transmission capacity. This will in
turn hamper customer services thus adding to costs.
However, NRG Energy recently completed numerous inorganic and
organic growth projects, including the acquisition of GenOn, and
started operations at the newly installed Alpine Generating
Station along with signing a 20-year electricity sale agreement
). These projects will likely help the company to meet the
growing demand from California and Arizona.
Our proven model does not conclusively show that NRG Energy is
likely to beat earnings this quarter. That is because a stock
needs to have both a positive Expected Surprise Prediction or ESP
Zacks Earnings ESP: A Better Method
) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not
the case here as you will see below.
The earnings ESP is 0.0%. This is because the Most Accurate
estimate as well as the Zacks Consensus Estimate stands at a loss
of 29 cents.
Zacks Rank #3 (Hold):
NRG Energy with Zacks Rank #3 (Hold), enhances the possibility of
an earnings surprise. However, the Zacks Rank #3 when combined
with a 0.0% ESP 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.
Other Stocks to Consider
NRG Energy is not the only organization looking up this earnings
season. We also expect other utility providers to beat earnings:
Ormat Technologies Inc.
), earnings ESP of +50.00% and Zacks Rank #2 (Buy).
Berry Petroleum Company
), earnings ESP of +4.05% and Zacks Rank #3 (Hold).