What's In Store For American Electric (AEP) In Q4 Earnings?

American Electric Power Company, Inc. (NYSE:AEP) is set to release fourth-quarter and 2017 results on Jan 25, before the market opens. Last quarter, this electric utility saw a negative earnings surprise of 4.35%.

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

Factors to Consider

American Electric is highly dependent on coal for production of electricity. Thus, President Trump’s emphasis on boosting the coal industry and relaxing environmental regulations in is likely to enhance the
company’s prospects in the near term.

In 2016, strong dollar and weak global demand were significant headwinds for the company. In 2017, American Electric witnessed an improvement in global economic conditions and the softening of the U.S.
dollar. These are expected to help the company deliver improved results in the fourth quarter as well as full-year 2017.

On the flip side, mild weather conditions impacted the company in the third quarter and are expected to do so in the fourth quarter as well. This might impede earnings growth. However, mild weather will lead to
reduced operations and maintenance expenses for the company.

These factors might nullify the effect of each other and even boost earnings, as is evident from the Zacks Consensus Estimate for fourth-quarter earnings that reflects 19.4% improvement. However, the company’s
revenue estimate, pegged at $3.49 billion, reflects an annual decline of 8.1%.

American Electric Power Company, Inc. Price and EPS Surprise

Earnings Whispers

Our proven model does not conclusively show an earnings beat for American Electric 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: American Electric has an Earnings ESP of -0.50%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: American Electric carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are a few companies in the utility sector that have the right combination of elements to post an earnings beat this quarter.

BCE Inc. (TO:BCE) is expected to report quarterly results on Feb 8. The company has an Earnings ESP of +2.13% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CenterPoint Energy (NYSE:CNP) has an Earnings ESP of +3.75% and a Zacks Rank #2. The company is expected to report quarterly results on Feb 22.

Westar Energy (NYSE:WR) has an Earnings ESP of +5.88% and a Zacks Rank #2. The company is slated to release fourth-quarter results on Feb 28.

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