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American Electric (AEP) to Post Q2 Earnings: What's in Store?

Zacks Equity Research

American Electric Power Company, Inc. AEP is set to release second-quarter 2019 results on Jul 25, before the market opens. In the trailing four quarters, the company came up with average positive earnings surprise of 6.15%.

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

Factors at Play

At the beginning of the second quarter of 2019, majority of the company's service territories witnessed above-normal temperatures along with warm weather conditions. This was followed by significantly wet weather conditions witnessed by most of the company's service territories.

In fact, the entire United States witnessed the second wettest May in the past 125 years.

The month of June, on the contrary, witnessed significantly cold weather conditions. Hence, for majority of the second quarter, American Electric’s service territories experienced temperatures that are likely to result in higher electricity demand, which in turn should drive the top line.

The company also has been experiencing a favorable rate case outcomes trend for the past couple of years. In line with the above-mentioned developments, the Zacks Consensus Estimate for American Electric’s second-quarter revenues pegged at $4.24 billion indicates a rise of 5.9% from the year-ago quarter’s reported figure.

Per management, the company has a notable exposure to the trade policy, given the higher concentration of export manufacturers located within its service territories. Lately, American Electric is witnessing declining industrial sales, led by the recent restrictive trade policies, which have challenged export manufacturers within its territories. We may expect the upcoming quarterly results to reflect a similar trend.

During the first-quarter earnings conference call, American Electric projected income taxes to have no favorable impact on its bottom line for the rest of the year, primarily due to timing.

In line with this, the Zacks Consensus Estimate for the company’s second-quarter earnings pegged at 98 cents implies a 3% decline from the
year-ago quarter’s reported figure.

Earnings Whispers

Our proven model does not conclusively show that American Electric is likely to beat on earnings 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) — for this to happen. This is not the case here, as you will see below.

Earnings ESP: American Electric has an Earnings ESP of -0.46%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

American Electric Power Company, Inc. Price and EPS Surprise

 

American Electric Power Company, Inc. Price and EPS Surprise

American Electric Power Company, Inc. price-eps-surprise | American Electric Power Company, Inc. Quote

 

Stocks to Consider

Here are a few companies from the Utilities sector that have the right combination of elements to post an earnings beat this quarter.

Entergy Corporation ETR has an Earnings ESP of +1.40% and a Zacks Rank #2. The company is expected to release second-quarter 2019 results on Jul 31.

The Southern Company SO has an Earnings ESP of +0.46% and a Zacks Rank #3. The company is expected to release second-quarter 2019 results on Jul 31.

NextEra Energy, Inc. NEE has an Earnings ESP of +1.41% and a Zacks Rank #3. The company is scheduled to release second-quarter results on Jul 24.

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