Will CenterPoint Energy (CNP) Disappoint This Quarter? - Analyst Blog

CenterPoint Energy, Inc. CNP is slated to release its first quarter 2014 financial results before the opening bell on May 1, 2014. The company posted a negative earnings surprise of 3.70% in the preceding quarter. Let's see how things are shaping up prior to this announcement.

Factors to Consider

CenterPoint, a public utility holding company in the U.S., provides several services including electric transmission and distribution, natural gas distribution and competitive natural gas retailing. The company serves more than five million metered customers primarily in Arkansas, Louisiana, Minnesota, Mississippi, Oklahoma and Texas.

In fourth quarter 2013, the company's earnings declined 16.1% year over year without the benefit of inclement weather at its electric utility.

Although higher demand resulting from severe cold weather may generate top line growth for the company, we remain apprehensive about CenterPoint's operating expenses. The company expects an increase in 2014 operating expenses owing to the upgrade of grid and safety facilities. Hence, rising operating expenses may hit the company's bottom line. Notably, for 2014, the company expects its earnings to be in the range of $1.08 − $1.17 per share, much lower than 2013 profit level of $1.26 per share.

Earnings Whispers

Accordingly, our proven model does not conclusively show that CenterPoint 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 Earnings ESP is -8.82%. That is because the Most Accurate estimate stands at 31 cents while the Zacks Consensus Estimate is pegged higher at 34 cents. That is a difference of -8.82%.

Zacks Rank: CenterPoint's Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult. 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.

NRG Yield, Inc. NYLD has an earnings ESP of +23.53% and carries a Zacks Rank #1 (Strong Buy).

Calpine Corp. CPN has an earnings ESP of +28.57% and carries a Zacks Rank #2 (Buy).

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