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Is Ameren (AEE) Likely to Disappoint This Earnings Season?

Zacks Equity Research

Ameren Corporation AEE is set to release third-quarter 2017 results on Nov 3, before the market opens.

Last quarter, this utility delivered a positive earnings surprise of 14.49%. Moreover, it surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average earnings beat of 2.83%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors at Play

During the second quarter earnings call, Ameren declared that it expects to incur non-cash estimated charge of 6 cents per share in the third quarter, primarily at the parent company. This charge is the result of revaluation of deferred taxes owing to an increase in the Illinois corporate income tax rate, effective Jul 1, 2017.

The company also stated that due to the change in timing of interim period revenue recognition in Ameren Illinois, its earnings will decrease by approximately 23 cents per share in the quarter under review. In line with this, the Zacks Consensus Estimate for Ameren’s earnings reflects 9.9% decline, for the soon-to-be reported quarter.

However, the unemployment rate in Ameren’s service territories is less compared with the national average. An improving economy is also likely to boost future utility demand in the state, thereby improving the company’s performance.

Moreover, the company’s service territories witnessed warmer-than-normal temperatures during the quarter. This, in turn, will result in higher household expenditures on cooling, consequently leading to improvement on the revenue front.

Ameren Corporation Price and EPS Surprise

Ameren Corporation Price and EPS Surprise | Ameren Corporation Quote

Earnings Whispers

Our proven model does not show that Ameren is likely to beat estimates in this quarter. This 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 estimates. Unfortunately, that is not the case for Ameren.

Zacks ESP: Ameren has an Earnings ESP of -3.65%. This is because the Most Accurate estimate is pegged at $1.32 and the Zacks Consensus Estimate stands at $1.37. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Ameren has a Zacks Rank #4 (Sell).

As it is we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few operators in the electric utility space that you may consider, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

NRG Energy, Inc. NRG will report next quarterly results on Nov 2. The company has an Earnings ESP of +7.92% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Exelon Corporation EXC has an Earnings ESP of +0.48% and a Zacks Rank #3. The company is scheduled to report next quarterly results on Nov 2.

Chesapeake Utilities Corporation CPK has an Earnings ESP of +1.45% and a Zacks Rank #3. The company is slated to release next quarterly results on Nov 9.

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