Consolidated Edison (ED) Q3 Earnings: What's In Store?

New York-based Consolidated Edison, Inc. (NYSE:ED) is set to release third-quarter 2016 results after the closing bell on Nov 3.

Last quarter, the company delivered a positive earnings surprise of 5.48%. Moreover, Consolidated Edison has outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average positive surprise of 2.60%.

Let’s see how things are shaping up prior to this announcement.

Factors at Play

Consolidated Edison has gradually been converting some of its operations to gas, which is safer for the environment. The company has, in fact, been investing steadily in its renewable generation assets. In the first half of 2016, it invested $1,250 million in renewable electric production, and electric and gas transmission projects.

Per its earlier announcement, management will continue with its renewable investments in the remaining half of 2016 as well. This is in line with its earlier stated plan to invest $3,168 million in energy delivery systems and $985 million in renewable electric production projects in 2016. We expect the to-be-reported quarter’s results to reflect the continuance of this investment.

Meanwhile, in Sep 2016, Consolidated Edison announced that its customers have set a record for power consumption during the year's two hottest months, using 13.29 million megawatt hours to run the homes and businesses, in July and August. The previous record for usage in a two-month period was 13.26 million megawatt hours, set in Jul and Aug, 2010.

Notably, the company invested $1.6 billion in its electric delivery systems to prepare for the summer of 2016 and has been investing $1 billion each year, since 2005. This record power consumption shows that the company is getting duly payed off for its investment, apart from attracting more customers to choose its wide-range energy-products and services.

For the third quarter, the Zacks Consensus Estimate for earnings reflects a 3.24% year-over-year increase, while sales are anticipated to be up 3.55% to $3.57 billion.

However, disruption in the wholesale energy markets, stringent utility regulations and interruption in operation of its generating units could be detrimental for Consolidated Edison’s growth.

Earnings Whispers

Our proven model does not conclusively show that Consolidated Edison is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks ESP: Consolidated Edison has an Earnings ESP -1.34%. This is because the Most Accurate estimate is $1.47, while the Zacks Consensus Estimate is pegged at $1.49.

Zacks Rank: Consolidated Edison’s Zacks Rank #3, when combined with a negative Earnings ESP, makes surprise prediction difficult.

Note that Sell-rated stocks (#4 or #5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few stocks in the Utility space worth considering on the basis of our model which shows that they have the right combination to pull off a beat:

Pattern Energy Group Inc. (NASDAQ:PEGI) has an Earnings ESP of +16.67% and a Zacks Rank #2. The company is scheduled to release third-quarter results on Nov 7.

Ameren Corporation (NYSE:AEE) is scheduled to report on Nov 4.It has an Earnings ESP of +2.90% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Water Works Company, Inc. (NYSE:AWK) has an Earnings ESP of +2.00% and a Zacks Rank #2. The company is slated to release results on Nov 2.

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