Will Entergy Corp (ETR) Earnings Disappoint This Season? - Analyst Blog

Entergy Corporation (ETR) is scheduled to report third-quarter 2014 results before the opening bell on Nov 4. Last quarter, Entergy posted a 2.63% negative earnings surprise. Let's see how things are shaping up for the third quarter.

Factors to Consider

New Orleans, LA based Entergy Corporation is primarily engaged in the production and retail distribution of electric power. The company operates largely through its two business segments – Utility and Energy Wholesale Commodities (EWC).

Entergy released preliminary earnings guidance for third-quarter 2014 of $1.67 per share. Entergy revealed that revenue from its Utility segment increased from last year, attributable to a favorable rate case settlement and higher sales volume to industrial customers. However, milder-than-normal weather reduced earnings by 11 cents per share in the quarter in spite of the higher volume (read: Entergy (ETR) Provides Preliminary Q3 Earnings Guidance).

Diversity in Entergy's service areas and a lower unemployment rate in these regions will help the company to generate stable revenues. However, Entergy's regulated utilities fall back on regular rate relief in its service territories. Any adverse decision on the same will deter the company from achieving its projected guidance.

Earnings Whispers?

Our proven model does not conclusively show that Entergy Corporation will 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) to be able to beat consensus estimates. That is not the case here as you will see below.

Zacks ESP:  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 Zacks Consensus Estimate are currently at $1.67 per share.

Zacks Rank: Entergy's Zacks Rank #3 when combined with a 0.00% ESP makes an earnings prediction difficult.

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

Stocks to Consider

Here are some stocks in the utility space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

Consolidated Edison, Inc. (ED) has an earnings ESP of +2.80% and a Zacks Rank #2 (Buy).

ALLETE, Inc. (ALE) has an earnings ESP of +2.78% and a Zacks Rank #3 (Hold).

Duke Energy Corporation (DUK) has an earnings ESP of +0.66% and a Zacks Rank #3 (Hold).