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CenterPoint (CNP) Q4 Earnings: Stock to Pull a Surprise?

Zacks Equity Research

CenterPoint Energy, Inc. CNP will release fourth-quarter 2016 financial results before the market opens on Feb 28. Last quarter, the utility reported a positive earnings surprise of 10.81%. Let’s see how things are shaping up at CenterPoint Energy prior to this announcement.

Factors to Consider

During the third-quarter earnings call, CenterPoint Energy had said that in the fourth quarter the company will recognize earnings related to the approval, for its $10.6 million energy efficiency performance incentive.

Moreover, based on its strong fourth-quarter expectations and strong performance in the first nine months of 2016, the company increased its earnings expectation for the full year.

Additionally, the unemployment rate in CenterPoint Energy’s service territories is marginally better than the national average. An improving economy is likely to boost future utility demand in the state. This will also drive the company’s performance.

For the fourth quarter, the Zacks Consensus Estimate for earnings projects growth of 12.50%, while the consensus for revenues hints at an improvement of 10.72% on a year-over-year basis.

However, the company's service territories witnessed warmer-than-normal temperatures during the fourth quarter. This will result in lower household expenditure on heating, which is expected to unfavorably impact revenues in the fourth quarter.

CenterPoint Energy, Inc. Price and EPS Surprise


CenterPoint Energy, Inc. Price and EPS Surprise | CenterPoint Energy, Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that CenterPoint Energy is likely to beat earnings this 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. Unfortunately, that is not the case here, as you will see below.

Zacks ESP: CenterPoint Energy has an Earnings ESP 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 29 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: CenterPoint Energy’s Zacks Rank #2, when combined with a 0.00% ESP, makes surprise prediction difficult.

We note that Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

A Stock to Consider

Here is a stock in the Utility space worth considering on the basis of our model, which shows that it has the right combination to pull off a beat:

Spark Energy, Inc. SPKE will report fourth-quarter results on Mar 9. The company has an Earnings ESP of +14.43% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Releases

American Electric Power Co., Inc. AEP reported fourth-quarter 2016 operating earnings of 67 cents per share, beating the Zacks Consensus Estimate of 55 cents by 21.8%.

CMS Energy Corporation CMS reported fourth-quarter 2016 adjusted earnings per share of 29 cents were in line with the Zacks Consensus Estimate. Quarterly earnings, however, declined 23.7% from the year-ago figure of 38 cents.

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