What's in Store for Xcel Energy (XEL) this Earnings Season? - Analyst Blog
Xcel Energy Inc. (XEL) is scheduled to report fourth-quarter 2014 results before the opening bell on Jan 29. Last quarter, Xcel Energy posted a negative earnings surprise of 3.95%. Let’s see how things are shaping up for the fourth quarter.
Factors Affecting this Quarter
Minneapolis, MN-based Xcel Energy is a major electricity and natural gas company in the U.S. Through its subsidiaries, the company is primarily engaged in the utility business and has a presence in eight states.
Xcel Energy’s earnings are highly dependent on constructive regulatory outcomes for rate cases. In early 2014, North Dakota Public Service Commission approved an annual base rate increase of 4.9% for three years starting from 2013.
The sign of economic improvement is also prominent across Xcel Energy’s service territories, especially in Minnesota, in comparison to the nation on the whole. This could drive the company’s financials this quarter.
Despite management’s target to curtail costs, Xcel Energy’s growing operation and maintenance expenses are a drag on the bottom line. Other risks involve stringent environment regulations and uneven weather patterns that could lead to unstable earnings.
Earnings Whispers?
Our proven model does not conclusively show that Xcel Energy will beat earnings 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) to be able to beat consensus estimates. That is not the case here as you will see below.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -8.82%. This is because the Most Accurate Estimate is 31 cents per share while the Zacks Consensus Estimate stands at 34 cents.
Zacks Rank: Xcel Energy’s Zacks Rank #2 when combined with a -8.82% ESP makes an earnings beat difficult to predict.
We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some stocks in the electric utility space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:
PNM Resources, Inc. (PNM) has an earnings ESP of +8.70% and a Zacks Rank #2.
PG&E Corporation (PCG) has an earnings ESP of +3.70% and a Zacks Rank #2.
Wisconsin Energy Corp. (WEC) has an earnings ESP of +1.75% and a Zacks Rank #2.
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WISC ENERGY CP (WEC): Free Stock Analysis Report
XCEL ENERGY INC (XEL): Free Stock Analysis Report
PG&E CORP (PCG): Free Stock Analysis Report
PNM RESOURCES (PNM): Free Stock Analysis Report
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