Edison InternationalEIX is scheduled to report first-quarter 2016 earnings results on May 2, after the market closes.
Last quarter, the company had posted a positive earnings surprise of 46.67%. Let's see how things are shaping up for this quarter.
Factors at Play
Edison International presents a lower risk profile compared to its utility-only peers, with a strong portfolio of regulated utility assets and well-managed merchant energy operations. In addition, the company boasts a solid financial position backed by strong cash generation capacity. The company's chief unit, Southern California Edison ("SCE"), operates in a supportive regulatory environment that allows the utility to grow systematically.
Moreover, SCE has witnessed a sharp rise in its regulated rate base in recent times. Between 2015 and 2017, SCE targets 7% average annual rate base growth and earnings growth driven by systematic investments in infrastructure projects. SCE intends to invest approximately $4.1 billion in 2016.
On the flip side, a milder-than-usual winter could hurt first-quarter sales.
Earnings Whispers
Our proven model does not conclusively show that Edison International is likely to beat estimates this quarter. That 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. But that 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, is -2.22%. This is because the Most Accurate estimate stands at 88 cents, while the Zacks Consensus Estimate is pegged higher at 90 cents.
Zacks Rank: Though Edison International's Zacks Rank #2 increases the predictive power of ESP, we need a positive ESP to be confident about an earnings beat.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are a few stocks in the electric utility space you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this season:
Pattern Energy Group Inc. PEGI has an Earnings ESP of +466.67% and a Zacks Rank #3. The company is expected to release first-quarter 2016 results on May 5.
Hawaiian Electric Industries Inc. HE has an Earnings ESP of +2.70% and a Zacks Rank #3. The company is expected to release first-quarter 2016 earnings on May 4.
Consolidated Edison, Inc. ED has an Earnings ESP of +0.82% and a Zacks Rank #3. The company is expected to report first-quarter 2016 earnings on May 5.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
HAWAIIAN ELEC (HE): Free Stock Analysis Report
EDISON INTL (EIX): Free Stock Analysis Report
CONSOL EDISON (ED): Free Stock Analysis Report
PATTERN ENERGY (PEGI): Free Stock Analysis Report
To read this article on Zacks.com click here.
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.
