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Will Public Service Enterprise Group (PEG) Miss Q2 Earnings?

Zacks Equity Research

Public Service Enterprise Group Inc. (PEG) is scheduled to report second quarter 2014 results before the opening bell on Jul 30. Last quarter, this utility had posted a positive earnings surprise of 5.21%. Let’s see how things are shaping up for this announcement.

Factors at Play

Newark, NJ-based Public Service Enterprise, through its two important subsidiaries PSEG Power LLC and Public Service Electric and Gas Company (PSE&G), provides utility services in the Northeastern and Mid-Atlantic parts of the U.S.

Over the next five years, the company intends to invest $12 billion, including $6.8 billion under the transmission capital spending program to protect and strengthen its electric and gas systems. Currently, the company is in the middle of several projects, including Northeast Grid Reliability Project and the 230-kV Southern Reinforcement Project (Mickleton-Gloucester-Camden).

The scheduled completion of these projects will enable Public Service Enterprise to provide reliable services to its customers besides boosting its scale of operations. The company believes that it is on track to achieve its goal of double-digit earnings growth driven by a stable transmission capital spending program and strong locational advantages.

Public Service Enterprise is currently focusing on expanding its renewable portfolio through developing facilities and making strategic acquisitions in addition to focusing on transmission and distribution infrastructure. Recently, the PSEG Solar Source (“PSEG Solar”) unit announced that it will acquire a 13-megawatt (MWdc) solar energy facility from juwi solar Inc. (“JSI”) for $22 million. This is PSEG Solar’s eighth solar project in seven states, taking its solar portfolio capacity to 106 MWdc.

However, participation in the wholesale energy market exposes Public Service Enterprise to commodity price volatility, which has historically been cyclical in nature.

Earnings Whispers?

Our proven model does not conclusively show that Public Service Enterprise is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: The Earnings ESP for Public Service Enterprise is -5.46% since the Most Accurate estimate is 52 cents while the Zacks Consensus Estimate is 55 cents per share.

Zacks Rank: Public Service Enterprise’s Zacks Rank #3 (Hold) has little effect on the negative earnings ESP. We, however, caution against stocks with a Zacks Rank #4 and #5 going into the earnings season.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to beat estimates:

Ameren Corp. (AEE) has an earnings ESP of +14.04% and carries a Zacks Rank #1 (Strong Buy).

TECO Energy, Inc. (TE) has an earnings ESP of +3.70% and carries a Zacks Rank #2 (Buy).

Consolidated Edison, Inc. (ED) has an earnings ESP of +9.26% and carries a Zacks Rank #2 (Buy).

Read the Full Research Report on PEG
Read the Full Research Report on AEE
Read the Full Research Report on TE
Read the Full Research Report on ED

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