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What's in Store for American Electric (AEP) in Q2 Earnings?

American Electric Power Company, Inc. AEP is set to release second-quarter 2020 results on Aug 6, before market open. In the last-reported quarter, the company delivered a negative earnings surprise of 6.42%.

In the trailing four quarters, American Electric came up with an average earnings surprise of 1.35%.

Let’s see how things have shaped up prior to this announcement.

Factors at Play

During the April-June 2020 quarter, some parts of the company's service territories witnessed warmer-than-normal temperatures, while in some other parts temperature remained below normal. Moreover, a few states like Texas, Oklahoma, Arkansas, Tennessee and Louisiana experienced notable storm activities, followed by heavy rainfall.

American Electric Power Company, Inc. Price and EPS Surprise

American Electric Power Company, Inc. Price and EPS Surprise

American Electric Power Company, Inc. price-eps-surprise | American Electric Power Company, Inc. Quote

So, overall, weather conditions seem to have boosted electricity demand in American Electric’s service territory, which, in turn, must have contributed to its top-line growth in the soon-to-be-reported quarter.

In April, the Public Utility Commission of Texas issued a final order approving the settlement agreement in the AEP Texas base rate case, allowing for a 9.4% return on common equity. This favorable rate case outcome is expected to have boosted the top line.

However, the company might have witnessed weak sales from oil and gas industries as COVID-led restrictions are expected to have hampered pipeline transportation sector.

The Zacks Consensus Estimate for American Electric’s second-quarter revenues is pegged at $3.80 billion, indicating a rise of 5.6% from the year-ago quarter figure.

To tackle the unprecedented situation that arose due to the novel coronavirus outbreak,American Electric has taken action to reduce untracked operations and maintenance expenses by an additional $100 million. This initiative must have reduced its overall expense thereby bolstering quarterly earnings.

The Zacks Consensus Estimate for the company’s second-quarter earnings is pegged at $1.06 per share, suggesting 6% improvement from the year-ago quarter’s reported figure.

What the Zacks Model Unveils

Our proven model does not conclusively predict an earnings beat for American Electric this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here.

Earnings ESP: American Electric has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Here are some players from the Utilities sector that have the right combination of elements to post an earnings beat in the to-be-reported quarter.

Pinnacle West Capital Corporation PNW is set to release second-quarter earnings on Aug 6. It has an Earnings ESP of +5.07% and a Zacks Rank #3, presently.

American Water Works Company, Inc. AWK is set to release second-quarter earnings on Aug 5. It has an Earnings ESP of +1.18% and a Zacks Rank of 3, currently.

CenterPoint Energy, Inc. CNP is expected to release second-quarter numbers on Aug 6. It has an Earnings ESP of +7.87% and a Zacks Rank of 3 currently.

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American Electric Power Company, Inc. (AEP): Free Stock Analysis Report

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American Water Works Company, Inc. (AWK): 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.

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