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Will Xcel Energy (XEL) Miss this Earnings?

Zacks Equity Research

Xcel Energy Inc. (XEL) will release its first quarter 2014 financial results before the market bell on May 1, 2014. In the prior quarter, this utility reported a positive earnings surprise of 3.45%. Xcel Energy currently has a Zacks Rank #2 (Buy). Let’s see how things are shaping up at Xcel Energy prior to this announcement.

Factors to Consider this Quarter

The ongoing improvement in the U.S. economy and the cold spell in Xcel Energy’s service territories are expected to have a favorable impact on first-quarter results. The company also stands to benefit from the new rates that have been implemented in some of the states of its operation.

However, rising operating expenses could offset to some extent the expected gains and impact margins. In fact, in 2013, operating expenses increased at a higher clip than revenues. Xcel Energy guided that 2014 expenses will also increase from 2013 levels.

Earnings Whispers

Accordingly, our proven model does not conclusively show that Xcel Energy is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Zacks ESP:  This is because the Most Accurate estimate and the Zacks Consensus Estimate stand at 50 cents, resulting in a 0.00% ESP.

Zacks Rank #2 (Buy): Xcel Energy’s Zacks Rank #2 combined with a 0.00% ESP makes surprise prediction difficult.  We caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some companies tied to the Electric utility industry worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.

Calpine Corp.(CPN) has an earnings ESP of +28.57% and carries a Zacks Rank #2 (Buy).

Public Service Enterprise Group Inc. (PEG) has an earnings ESP of +7.61% and carries a Zacks Rank #2 (Buy).

Ameren Corporation (AEE) has an earnings ESP of +6.25% and carries a Zacks Rank #3 (Hold).

Read the Full Research Report on AEE
Read the Full Research Report on XEL
Read the Full Research Report on CPN
Read the Full Research Report on PEG

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