Is A Beat In Store For Entergy (ETR) This Earnings Season?

Entergy Corporation (NYSE:ETR) , primarily engaged in electric power production and retail distribution of power, is scheduled to report its financial results on Oct 24, before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that Entergy is likely to beat earnings in the to-be-reported quarter because it has the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), which have a significantly higher chance of beating earnings.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate is +3.94%. This is because the Most Accurate estimate is at $2.25, while the Zacks Consensus Estimate is pegged lower at $2.16. This is a meaningful indicator of a likely positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Entergy carries a Zacks Rank #3, which when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.

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

Now, the factors influencing Entergy's quarterly results are elaborated below.

Factors at Play

During the second-quarter earnings call, Entergy had said that there were non-recurring items in 2016 that will lead to a decline of 5 cents in its third-quarter earnings.

The company also expects to continue witnessing higher nuclear spending that will increase staffing levels to be consistent with industry norms and execute on projects resultantly improving the reliability. This, in turn, is expected to decrease earnings about 20 cents in the second half of the year, about two thirds of which will be in the third quarter.

Apart from this, other non-fuel operations and maintenance expenses are expected to deteriorate third-quarter earnings by 10 cents. Overall, the performance in the to-be-reported quarter is expected to be poor compared with the year-ago quarter. Evidently, the Zacks Consensus Estimate for the yet-to-be reported quarter’s earnings moved down 6.5%.

On the brighter note, this New Orleans, LA-based company’s service territories witnessed above-average temperatures during the quarter. This should in fact lead to increased electric sales in these regions, which in turn, is expected to boost the top line. May be that’s why our Consensus Estimate called for revenues of $3.13 billion in the third quarter, implying a year-over-year increase of 0.1%, for Entergy.

Stocks to Consider

Here are a few other operators in the electric utility space worth considering, as our model shows that they have the right combination of elements to post an earnings beat this quarter.

NiSource, Inc. (NYSE:NI) will report third-quarter results on Nov 1. The company has an Earnings ESP of +7.69% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

EverSource Energy (NYSE:ES) has an Earnings ESP of +1.85% and a Zacks Rank #3. The company is expected to report third-quarter results on Nov 1.

Pinnacle West Capital Corporation (NYSE:PNW) has an Earnings ESP of +0.72% and a Zacks Rank #3. The company is slated to release third-quarter results on Nov 3.

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