Why Earnings Season Could Be Great for American Electric Power (AEP)


Investors are always looking for stocks that are poised to beat at earnings season and American Electric Power Co., Inc. (AEP) may be one such company. The firm has earnings coming up pretty soon, and events are shaping up quite nicely for their report.

That is because American Electric Power is seeing favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. After all, analysts raising estimates right before earnings—with the most up-to-date information possible—is a pretty good indicator of some favorable trends underneath the surface for AEP in this report.

In fact, the Most Accurate Estimate for the current quarter is currently at 77 cents per share for AEP, compared to a broader Zacks Consensus Estimate of 75 per share. This suggests that analysts have very recently bumped up their estimates for AEP, giving the stock a Zacks Earnings ESP of 2.67% heading into earnings season.

Why is this Important?

A positive reading for the Zacks Earnings ESP has proven to be very powerful in producing both positive surprises, and outperforming the market. Our recent 10 year backtest shows that stocks that have a positive Earnings ESP and a Zacks Rank #3 (Hold) or better show a positive surprise nearly 70% of the time, and have returned over 28% on average in annual returns (see more Top Earnings ESP stocks here).

Given that AEP has a Zacks Rank #2 (Buy) and an ESP in positive territory, investors might want to consider this stock ahead of earnings. Clearly, recent earnings estimate revisions suggest that good things are ahead for American Electric Power, and that a beat might be in the cards for the upcoming report.
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