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Entergy Corp (ETR) Q4 Earnings: Is a Beat in the Cards?

Zacks Equity Research

Entergy Corporation ETR will release fourth-quarter 2016 financial numbers before the opening bell on Feb 15. The company reported a positive earnings surprise of 18.46% in the last reported quarter. Let’s see how things are shaping up prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that Entergy is likely to beat on earnings this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates, and Entergy has the right mix.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +9.09%. This is because the Most Accurate estimate stands at 12 cents, while the Zacks Consensus Estimate is pegged slightly lower at 11 cents. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Entergy’s Zacks Rank #3, when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

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

Entergy Corporation Price and EPS Surprise


Entergy Corporation Price and EPS Surprise | Entergy Corporation Quote

Factors at Play

During the third-quarter earnings call, Entergy announced that it will continue to reduce spending in the fourth quarter. This is expected to help in driving its performance in the to-be-reported quarter.

Moreover, Entergy reaffirmed its operational earnings per share guidance in the range of $6.60-$7.40 and adjusted earnings of the Utility, Parent & Other’s segment in the band of $4.20–$4.50 per share for 2016.

Earlier, the company had revealed plans to invest $3.77 billion in 2016, with the lion’s share being allocated for the generation and transmission businesses. The company expects grid upgrades, asset replacement, and industrial load development to drive bottom-line growth in 2016.

Again, the company's service territories witnessed above-average temperatures during the fourth quarter. This should in fact lead to increased electric sales in these regions, which in turn, is expected to boost the top line.

For the fourth quarter, the Zacks Consensus Estimate for earnings is 11 cents, reflecting a decline of 93.3%. Revenues are expected to be $2.94 billion, implying a 17.1% year-over-year improvement.

Other Stocks to Consider

Here are a few other operators in the electric utility space worth considering, as our model shows that they have the right combination of elements to post an earnings beat this quarter:

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

SCANA Corporation SCG has an Earnings ESP of +3.23% and a Zacks Rank #2. The company will report fourth-quarter results on Feb 16.

Pinnacle West Capital Corporation PNW has an Earnings ESP of +2.04% and a Zacks Rank #2. The company is expected to release fourth-quarter results on Feb 24.

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