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American Electric Likely to Miss

Zacks Equity Research

American Electric Power Co. Inc. (AEP) is set to report fourth quarter and full year results on Feb 15, 2013. Last quarter, the company met the Zacks Consensus Estimate. Let’s see how things are shaping up for this announcement.

Factors to Consider This Quarter

American Electric Power experienced a stable quarter with a few organizational changes. Also, the company focused on redemption of senior notes which would bring down the level of debt. Moreover, the company’s stable earnings base provides stability to the revenue stream and insulates the company from adverse regulatory decisions and detrimental effects of lower sales in a particular service area.

Key growth drivers for the company are core regulated operations, growth through transmission network expansion and an above-average dividend yield. However, tepid economies in a number of its service states, uncertainty surrounding pending regulatory cases, its predominantly fossil-fuel based generation assets, lower wholesale sales and no catalysts in the near term compel us to remain on the sidelines.

Earnings Whispers?

Our proven model does not conclusively show that American Electric Power is likely to beat earnings this quarter. This is because a stock needs to have both a positive earnings Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. This is not the case here as you will see below.

Negative Zacks ESP:  This is because the Most Accurate estimate stands at 44 cents per share while the Zacks Consensus Estimate is at 45 cents per share. That is a difference of -2.22%.

Zacks #3 Rank (Hold): American Electric’s Zacks Rank #3 (Hold) when combined with a negative earnings ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

NV Energy, Inc. (NVE) has earnings ESP of +14.29% and carries a Zacks Rank #3 (Hold).

PPL Corporation (PPL) has earnings ESP of +2.17% and carries a Zacks Rank #3 (Hold).

Calpine Corp. (CPN) has earnings ESP of +133.33% and carries a Zacks Rank #3 (Hold).

Read the Full Research Report on AEP

Read the Full Research Report on CPN

Read the Full Research Report on PPL

Read the Full Research Report on NVE

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