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Is Entergy (ETR) Poised for a Beat this Earnings Season?

Entergy CorporationETR will release fourth-quarter 2015 financial results before the market bell on Feb 18, 2016. The company had reported a negative earnings surprise of 1.55% in the previous quarter. Let's see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Entergy is likely to beat earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) to beat estimates, and Entergy has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.95%. This is because the Most Accurate estimate is at $1.57, while the Zacks Consensus Estimate is pegged lower at $1.54. This is a meaningful indicator of a likely positive earnings surprise.

Zacks Rank: Entergy currently carries a Zacks Rank #3.

The company's Zacks Rank #3 and positive ESP make us reasonably confident of an earnings beat this season.

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

What is Driving the Better-than-Expected Earnings?

Entergy is well positioned with its geographically diversified mix of regulated and merchant operations. The company's industrial sales improved 4% in the third quarter on the back of persistent growth in new and expansion projects as well as existing customers. Going forward, these factors should continue driving longer-term utility investment and earnings amid growing industrial activity. Moreover, Entergy has projected overall retail sales growth (weather adjusted) of 1.2% and industrial sales growth of 4.4% at its Utility business in 2015. However, the company expects industrial sales to witness modest growth in the fourth quarter, as one of its largest customers is on an extended outage.

Entergy's third-quarter 2015 earnings increased year over year on the back of a warmer-than-normal summer this year. Moreover, during the third-quarter conference call, the company raised its 2015 earnings outlook based on favorable weather conditions and to reflect the impact of tax benefits. However, a warm start to the winter will not bode well for electricity sales.

During the fourth quarter, the company closed the sale of 583-megawatt Rhode Island State Energy Center (RISEC), in Johnston, RI, to Carlyle Power Partners for around $490 million, excluding adjustments.

The company continues to modernize aging infrastructure, strengthen reliability and lower the carbon footprint of its generation fleet. We believe that these initiatives will help the company to meet the stringent emission standards of the updated Climate Action Plan.

Other Stocks to Consider

Here are a few other operators in the electric utility space worth considering as our model shows that they too have the right combination of elements to post an earnings beat this quarter:

Spark Energy SPKE has an earnings ESP of +2.30% and a Zacks Rank #3. It will report quarterly results on Mar 29.

PG&E Corporation PCG has an earnings ESP of +2.22% and a Zacks Rank #3. It will report quarterly results on Feb 18.

Consolidated Edison ED has an earnings ESP of +1.82% and a Zacks Rank #3. It will report quarterly results on Feb 18.

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ENTERGY CORP (ETR): 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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