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What's in the Cards for DTE Energy (DTE) in Q1 Earnings?

Zacks Equity Research

DTE Energy Company DTE is set to report first-quarter 2017 results on Apr 26, before the market opens.

Last quarter, the company posted a negative earnings surprise of 3.57%. However, the company surpassed the Zacks Consensus Estimate in two of the past four quarters, with an average beat of 8.15%.

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

Factors at Play

DTE Energy follows a disciplined capital spending program to maintain and upgrade reliability of its electric utility systems with $6.5 billion investment planned over the next 10 years. The company is also investing steadily to enhance its renewable generation assets. Such solid investment strategies are likely to boost DTE Energy’s expansion in the near as well as long term.

Coming to its first-quarter updates, at the very onset of the reporting cycle, DTE Energy announced that 30 wind turbines installed at its Pinnebog Wind Park has begun commercial operation. The new project has the ability to produce 50 megawatts (MW) of clean, renewable energy—enough to power more than 22,000 homes. It’s no surprise that this will boost DTE Energy’s revenue growth from its renewable energy resources in the first quarter.

With respect to its gas utility, the company entered into a period of significant investment, sometime around first quarter of 2017, to renew its aging infrastructure and thereby offer better service to its customers. Towards this end, the company’s current focus is on accelerating the replacement of its aging cast iron and unprotected steel pipes.

Simultaneously, DTE Energy has been automating its meters recently to reduce manual meter reading costs. We may expect such cost reductions to get reflected in the company’s yet-to-be-reported quarter’s result.

Moreover, expansion of the company’s Bluestone Pipeline’s capacity from 600,000 Dth/day to 975,000 Dth/day is expected to be in service in early 2017. Further updates on this expansion can be expected once the company reveals its first quarter results.

On the flip side, due to departure of one of the three FERC commissioners on Feb 3, 2017; final approval for DTE Energy’s NEXUS gas pipeline project got delayed. Notably, NEXUS is a proposed 255-mile pipeline to transport Utica and Marcellus shale gas to Ohio, Michigan and Ontario market centers and the company has a 50% stake in the project.

Had this been approved earlier, following the FERC application that management filed in the fourth quarter of 2015, it would have benefited DTE Energy’s first quarter revenue growth. Nevertheless, given a timely new FERC commissioner appointment and FERC order, DTE remains committed to a fourth-quarter 2017 in-service date for the NEXUS pipeline.

For the first quarter, the Zacks Consensus Estimate for earnings stands at $1.55 a share, up 2.24% year over year.

DTE Energy Company Price and EPS Surprise


DTE Energy Company Price and EPS Surprise | DTE Energy Company Quote

Earnings Whispers

Our proven model does not conclusively show that DTE Energy is likely to beat 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.

Zacks ESP: DTE Energy has an Earnings ESP of -1.29%. This is because the Most Accurate estimate stands at $1.53, lower than the Zacks Consensus Estimate of $1.55. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DTE Energy carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s Earnings ESP of -1.29% makes surprise prediction difficult.

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

Stocks that Warrant a Look

Here are a few stocks in the Utility space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

Pattern Energy Group Inc. PEGI is expected to report first-quarter 2017 results on May 8. The company has an Earnings ESP of +300.00% and a Zacks Rank #3.

Dominion Resources, Inc. D is expected to report first-quarter 2017 results on May 4. The company has an Earnings ESP of +2.15% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Entergy Corporation ETR is expected to report first-quarter 2017 results on April 26. The company has an Earnings ESP of +1.89% and a Zacks Rank #3.

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