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Ameren (AEE): Will the Stock Disappoint in Q4 Earnings?

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Ameren CorporationAEE is set to release fourth-quarter 2016 financial results before the market opens on Feb 16. Last quarter, the utility has reported a positive earnings surprise of 10.14%. Let's see how things are shaping up at the company prior to this announcement.

Factors at Play

During the third-quarter earnings call, Ameren had stated that the fourth-quarter results will have an unfavorable effect of 8 cents per share, which was earlier estimated to be 3 cents owing to the impact of the 2015 plan. Moreover, management also expects the year-over-year fourth-quarter earnings to be negatively impacted by lower sales of the Madrid smelter as well as regulatory lag related to increase in Missouri depreciation and transmission expenses.

However, the company said that it also expects a favorable effect on a year-over-year basis as it is assumed that temperatures will return to normal in the reported quarter in comparison with much milder than normal temperatures in fourth quarter of 2015. In addition, continued increased electric transmission and distribution infrastructure investment by Ameren Transmission Company of Illinois (ATXI), and Ameren Illinois as well as higher Illinois natural gas distribution rate in 2016, are likely to drive the company's results.

Ameren had raised its 2016 diluted earnings per share guidance to the range of $2.65-$2.75 from the earlier projection of $2.45-$2.65, during the third quarter's earnings call.

Ameren Corporation Price and EPS Surprise

Ameren Corporation Price and EPS Surprise | Ameren Corporation Quote

Earnings Whispers

Our proven model does not conclusively show that Ameren is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below:

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at -13.33%. This is because the Most Accurate estimate stands at 13 cents, while the Zacks Consensus Estimate is pegged a little higher at 15 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank: Ameren's Zacks Rank #3, when combined with a negative ESP, makes our surprise prediction difficult for this quarter.

Notably, Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few operators in the electric utility space that you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Spark Energy, Inc. SPKE will report fourth-quarter results on Mar 9. The company has an Earnings ESP of +14.43% and a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

SCANA Corporation SCG has an Earnings ESP of +3.23% and a Zacks Rank #2. The company will report fourth-quarter results on Feb 16.

Pinnacle West Capital Corporation PNW has an Earnings ESP of +2.04% and a Zacks Rank #2. The company is scheduled to release fourth-quarter results on Feb 24.

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Ameren Corporation (AEE): Free Stock Analysis Report

Pinnacle West Capital Corporation (PNW): Free Stock Analysis Report

Scana Corporation (SCG): Free Stock Analysis Report

Spark Energy, Inc. (SPKE): 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 Nasdaq, Inc.


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

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