Ameren Corp (AEE) Q3 Earnings: Stock To Beat Estimates?

We expect Ameren Corporation (NYSE:AEE) will beat earnings estimate when it’ll release third-quarter 2016 financial results before the market opens on Nov 4. Last quarter, the utility has reported a positive earnings surprise of 15.09%.

Why a Likely Positive Surprise?

Our proven model shows that Ameren is likely to beat 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 Ameren has the right mix.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +2.90%. This is because the Most Accurate estimate stands at $1.42, while the Zacks Consensus Estimate is pegged slightly lower at $1.38. This is a meaningful indicator of a likely positive earnings surprise.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Ameren’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.

Factors at Play

During the second-quarter earnings call, Ameren had stated that third-quarter earnings will decline by 5 cents compared to the prior year quarters due to the idling of Noranda’s smelter through the rest of 2016. This will lead to lower electric sales in 2016, which will in turn hurt Ameren’s bottom line.

Despite lower sales at Noranda this year, the company’s growth initiatives are expected to drive earnings at a compounded annual growth rate of 5% to 8% in the 2016−2018 time period.

However, the company's service territories witnessed above-average temperatures during the third quarter. This should translate into increased electric sales in these regions, which in turn, should boost the top line.

Other Stocks to Consider

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

Pattern Energy Group Inc. (NASDAQ:PEGI) is expected to release third-quarter results on Nov 3. The company has an Earnings ESP of +16.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

AES Corporation (NYSE:AES) has an Earnings ESP of +3.13% and a Zacks Rank #3. It is expected to report earnings on Nov 4.

Duke Energy Corporation (NYSE:DUK) has an Earnings ESP of +1.28% and a Zacks Rank #3. The company is expected to release third-quarter 2016 earnings on Nov 4.

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