WEC Energy (WEC) Likely To Beat Estimates In Q3 Earnings

We expect WEC Energy Group. (NYSE:WEC) to beat expectations when it reports third-quarter 2016 results before the market opens on Oct 26. Last quarter, this electric and natural gas utility reported a positive earnings surprise of 3.64%. The average positive surprise in the last four quarter was 3.47%.

Why a Likely Positive Surprise?

Our proven model shows that WEC Energy is likely to beat estimates 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 WEC Energy has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate of 62 cents and the Zacks Consensus Estimate of 59 cents, stands at +5.09%. This is a meaningful and leading indicator of a likely positive surprise.

Zacks Rank: WEC Energy currently carries a Zacks Rank #2. The combination of WEC Energy’s favorable Zacks Rank and positive ESP makes us reasonably confident of a positive surprise this season.

Conversely, we caution against Sell-rated stocks (#4 or #5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Consider

WEC Energy will continue to enjoy the benefits of the Integrys Energy acquisition. Thanks to the contribution of the acquired assets, the company expects earnings in the range of 55–59 cents per share in the third quarter. Note that 99% of WEC Energy’s earnings are derived from its regulated operations, which provide stability as well as visibility on its earnings.

Moreover, WEC Energy benefits from the ongoing economic improvement in its service territories, which drives residential, industrial and commercial demand.

In addition, the strong credit rating of the company allows it to enjoy superior credit worthiness in the market. The strong credit rating is a big positive for WEC Energy, especially in light of the possibility of an interest rate hike by the end of this year.

Other Stocks to Consider

WEC Energy is not the only utility company looking up this earnings season. We see likely earnings beats coming from these companies as well:

CMS Energy (NYSE:CMS) is expected to release third-quarter 2016 results on Oct 27, before the market opens. The company has an Earnings ESP of +5.26% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

DTE Energy Company (NYSE:DTE) has an Earnings ESP of +4.64% and a Zacks Rank #2. The company is expected to release third-quarter 2016 results on Oct 26, before the market opens.

Entergy Corporation (NYSE:ETR) has an Earnings ESP of +8.06% and a Zacks Rank #2. The company is expected to release third-quarter 2016 results before the market opens on Oct 25.

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