TECO Energy (TE) Q1 Earnings: Can The Stock Surprise?

Diversified energy company, TECO Energy, Inc. (NYSE:TE) is scheduled to report first-quarter 2016 results on May 5, before the market opens. Last quarter, the company reported an earnings surprise of 0.00%. Let’s see how things are shaping up for this quarter.

Factors to Consider

TECO Energy has been gaining traction on the back of a rising customer count. In fact, the company has consistently added customers over the last several quarters. TECO energy expects this customer growth trend to continue in 2016 as well. Increasing employment opportunities and the roll-out of the new single-family building permits, backed by a gradual recovery in the Florida economy, are expected to further boost demand for utility services.

However, earnings at the company tend to fluctuate with weather variations in its service territories. Warmer-than-expected temperatures during last winter could hurt demand for utility services and in turn, affect the performance of the company.

We remind investors that the planned acquisition of TECO Energy by Emera Inc. remains on track to close in mid 2016, subject to the approval of the New Mexico Public Regulation Commission ("NMPRC"). On the other hand, the Federal Energy Regulatory Commission (FERC) has already approved the acquisition in January.

Surprise History

The above chart indicates that TECO Energy was not able to beat earnings estimates in any of the last four quarters. The average earnings surprise was 0.00%.

Earnings Whispers

Our proven model does not conclusively show that TECO Energy will beat estimates 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. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 27 cents.

Zacks Rank: Though TECO Energy’s Zacks Rank #3 increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are a few operators in Utility-Electric Power space 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. (NYSE:ED) has an Earnings ESP of + 0.82% and a Zacks Rank #3. The company is expected to report earnings on May 5.

Hawaiian Electric Industries Inc. (NYSE:HE) has an Earnings ESP of + 2.70% and a Zacks Rank #3. The company is expected to report earnings on May 4.

Pattern Energy Group Inc. (NASDAQ:PEGI) has an Earnings ESP of + 466.67% and a Zacks Rank #3. The company is expected to report earnings on May 5.