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Is a Beat in Store for American Electric (AEP) Q1 Earnings?

Zacks Equity Research

American Electric Power Company, Inc. AEP is set to release first-quarter 2019 results on Apr 25, before the market opens. In the trailing four quarters, the company came up with average positive earnings surprise of 3.34%.

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

Why a Likely Positive Earnings Surprise

Our proven model shows a likely earnings beat for American Electric in the first quarter. That 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 the case here as you will see below.

Earnings ESP: American Electric has an Earnings ESP of +2.11%. You can uncover the best stocks to buy or sell, before they’re reported, with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3, which when combined with a positive ESP, makes us confident of a probable earnings beat. 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. Quote

Factors at Play

During the fourth-quarter 2018 earnings call, American Electric announced positive outcomes from its rate case in Indiana, Michigan, Kentucky, Oklahoma and Texas. We expect these outcomes to have a favorable impact on the company’s top line in the upcoming quarterly results.

Moreover, in the fourth quarter, unemployment rates in the company’s service territories fell to 4.1%, which was the lowest since 2000. Such steady economic developments hint at improved purchasing power of customers and growth in residential sales for American Electric in the first quarter.

In line with this, the Zacks Consensus Estimate for first-quarter revenues of $4.46 billion implies a rise of 10.2% from the prior-year quarter’s reported figure.

A robust economy and the company’s continuous focus on investments to enhance infrastructural upgrades, thereby boosting customer reliability, have enabled it to witness strong earnings growth in the recent past. We expect American Electric to witness similar trends in the first quarter as well.  

Moreover, favorable rate case outcomes and lower tax rates are expected to boost the company’s first-quarter earnings. In line with this, the Zacks Consensus Estimate for the company’s first-quarter earnings pegged at $1.09 indicates a rise of 13.5% from the year-ago quarter’s reported figure.

Other Stocks to Consider

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

NextEra Energy, Inc. NEE has an Earnings ESP of +2.64% and a Zacks Rank #3. The company is scheduled to release first-quarter results on Apr 23.

Consolidated Edison Inc ED has an Earnings ESP of +1.34% and a Zacks Rank #3. The company is scheduled to report first-quarter results on May 2.

Ameren Corp. AEE has an Earnings ESP of +3.70% and a Zacks Rank #3. The company is scheduled to report first-quarter results on May 9.

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Ameren Corporation (AEE) : Free Stock Analysis Report
 
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