Will Northeast Utilities (NU) Disappoint This Quarter? - Analyst Blog

Northeast Utilities NU is slated to release its first quarter 2014 financial results before the market bell on May 1, 2014. The company posted a negative earnings surprise of 1.72% in the preceding quarter. Northeast Utilities currently has a Zacks Rank #3 (Hold). Let's see how things are shaping up prior to this announcement.

Factors to Consider

Northeast Utilities could expect healthy sales return in the first quarter of 2014 attributable to severe winter weather, which would lead to increased demand for electricity and natural gas. Moreover, a 17% increase in the customer count in the company's gas business in 2013 will also be a growth driver this season. Also, the addition of NSTAR will continue to lend additional upside to the company's revenue stream.

However, another weak performance is foreseen from the company's NU Parent & Other business, which posted a 50% year-over-year revenue decline in the fourth-quarter 2013.This segment could prove to be a drag on Northeast Utilities' revenue in the first quarter.

Earnings Whispers

Accordingly, our proven model does not conclusively show that Northeast Utilities is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.

Negative Zacks ESP:  The Most Accurate estimate stands at 74 cents while the Zacks Consensus Estimate is pegged higher at 75 cents per share, resulting in a -1.33% ESP.

Zacks Rank #3 (Hold): The combination of a Zacks Rank #3 and a negative ESP makes an earnings surprise prediction difficult. Meanwhile, we caution against stocks with Zacks Ranks #4 and #5 (Sell-rated stocks) going into the earnings announcement.  

Other Stocks to Consider

Here are some companies in the diversified utility space having the right combination of elements to post an earnings beat this quarter.

Alliant Energy Corp. LNT has an earnings ESP of +1.30% and carries a Zacks Rank #2 (Buy).

Exelon Corp. EXC has an earnings ESP of +6.94% and carries a Zacks Rank #2 (Buy).

PPL Corp. PPL has an earnings ESP of +4.41% and carries a Zacks Rank #2 (Buy).