The AES Corporation (AES) will release its third-quarter 2014 financial results before the market open on Nov 6, 2014. In the prior quarter, this electric utility’s earnings were in line with estimates. Let’s see how things are shaping up at AES Corporation prior to this announcement.
Factors to Consider This Quarter
The severe drought in Latin America is expected to negatively impact results of AES Corporation. Its operations in Panama and Brazil are likely to drag overall earnings by 7 cents to 10 cents in 2014.
A milder summer in the U.S. this year is also expected to have a negative impact on power demand.
The company had taken the initiative to lower its global overhead costs over 2011-2015. These cost-saving initiatives are expected to marginally offset the headwinds this quarter.
Earnings Whispers
Our proven model indicates that AES Corporation does not have the right combination of elements to secure an earnings beat. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.
Negative Zacks ESP: This is because the Most Accurate estimate stands at 32 cents while the Zacks Consensus Estimate is 34 cents, resulting in -5.88% ESP.
Zacks Rank: AES Corporation has a Zacks Rank #4 (Sell). The -5.88% ESP combined with a Zacks #4 indicates a negative earnings surprise.
We particularly caution against stocks with Zacks Ranks #4 and 5 going into the earnings season.
Other Stocks to Consider
Here are some utilities worth considering on the basis of our model, which shows that they have the right combination of elements to post an earnings beat this quarter.
Consolidated Edison, Inc. (ED) has an earnings ESP of +2.80% and carries a Zacks Rank #2 (Buy).
NRG Yield, Inc. (NYLD) has an earnings ESP of +75.44% and carries a Zacks Rank #1 (Strong Buy).
Dynegy Inc. (DYN) has an earnings ESP of +260.0% and carries a Zacks Rank #3 (Hold).
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