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Will American Electric Power (AEP) Beat on Earnings this Season?

American Electric Power Co., Inc.AEP will release third-quarter 2015 financial results before the market opens on Oct 22, 2015. In the prior quarter, this utility reported a positive earnings surprise of 8.64%. American Electric Power currently has a Zacks Rank #2 (Buy). Let's see how things are shaping up at the company prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that American Electric Power is likely to beat earnings because it has the right combination of two key ingredients. 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. This is the case here.

Zacks ESP : Earnings ESP, which represents the difference between the Most Accurate estimate of 98 cents and the Zacks Consensus Estimate of 95 cents, is at +3.16%. This is a meaningful indicator of a likely positive earnings surprise for the shares.

Zacks Rank: The combination of American Electric Power's Zacks Rank #2 and +3.16% ESP makes us confident of a likely earnings beat.

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

What is Driving the Better-Than-Expected Earnings?

The decline in employment rates and strong industrial sales growth from customers in oil and gas related sectors are certainty going to contribute to the performance of the company.

American Electric Power expects to improve its 2015 earnings per share by 4% to 6% from 2014 levels, mainly on its focus on regulated operations and cost discipline.

American Electric Power's strong financial position enabled it to increase the quarterly dividend rate by 6% from the previous payout of 50 cents to 53 cents. The company has paid dividends to its shareholders for the last 421 quarters.

Other Stocks to Consider

Here are some companies tied to the Electric utility industry worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.

Consolidated Edison, Inc. ED has an earnings ESP of +1.79% and carries a Zacks Rank #3 (Hold).

Duke Energy Corporation DUK has an earnings ESP of +1.92% and carries a Zacks Rank #3 (Hold).

The AES Corporation AES has an earnings ESP of +2.78% and carries a Zacks Rank #3 (Hold).

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

AMER ELEC PWR (AEP): Free Stock Analysis Report

CONSOL EDISON (ED): Free Stock Analysis Report

DUKE ENERGY CP (DUK): Free Stock Analysis Report

AES CORP (AES): 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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