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Will Warm Weather Hurt FirstEnergy (FE) in Q4 Earnings?

Zacks Equity Research
Updated

FirstEnergy Corp. FE will release fourth quarter 2015 financial results after market closes on Feb 16, 2016. In the prior quarter, this utility reported a positive earnings surprise of 12.79%, with an average beat of 11.93% over the past four quarters. Let’s see how things are shaping up at FirstEnergy prior to this announcement.

Factors to Consider this Quarter

A milder start to winter saw FirstEnergy’s service territories experiencing record high temperatures in December. Lower household expenditure on heating will adversely impact revenues in the to-be-reported quarter. Depressed commodity prices and operational hazards pose other risks.

However, FirstEnergy has been consistently making investments in strengthening and modernizing its infrastructure to boost service reliability and enhance customer retention.

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FirstEnergy is also taking a number of initiatives to meet various environmental regulatory proposals and mandates.

Earnings Whispers

Our proven model does not conclusively show that FirstEnergy is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here.

Zacks ESP: FirstEnergy has an ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 58 cents.

Zacks Rank: FirstEnergy’s Zacks Rank #3, when combined with a 0.00% ESP, makes a surprise prediction uncertain this season.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

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.

Consolidated Edison, Inc. ED has an earnings ESP of +1.82% and carries a Zacks Rank #3.

The AES Corporation AES has an earnings ESP of +3.13% and carries a Zacks Rank #3.

NRG Energy, Inc. NRG has an earnings ESP of +26.19% and carries a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
CONSOL EDISON (ED): Free Stock Analysis Report
 
FIRSTENERGY CP (FE): Free Stock Analysis Report
 
AES CORP (AES): Free Stock Analysis Report
 
NRG ENERGY INC (NRG): Free Stock Analysis Report
 
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Zacks Investment Research