We expect energy services holding company AGL Resources Inc. (GAS) to beat expectations when it reports fourth-quarter 2014 financial results after the closing bell on Feb 11.
Why a Likely Positive Surprise?
Our proven model shows that AGL Resources is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +5.06%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: AGL Resources carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of AGL Resources’ Zacks Rank #3 and +5.06% ESP makes us confident of an earnings beat this season.
Factors to Consider
AGL Resources is a premier electric utility with relatively low risk earnings growth. Positioned in a niche industry with high barriers to entry, this energy services holding company enjoys near-monopoly status in its area of operation.
Moreover, the company has consistently maintained and grown dividends, an indication of its financial stability. Recently, AGL Resources upped its quarterly dividend by 4.1% to 51 cents.
Although the company has failed to meet the Zacks Consensus Estimate in the past few quarters, a beat could be likely in the upcoming results as suggested by upward revision of fourth-quarter estimates.
Stocks to Consider
Here are some companies from the same space which, according to our model, have the right combination of elements to post an earnings beat this quarter.
Seadrill Partners LLC (SDLP) has an Earnings ESP of +10.53% and a Zacks Rank #3 (Hold). The partnership is expected to release earnings on Feb 24.
LRR Energy, L.P. (LRE) has an Earnings ESP of +3.13% and a Zacks Rank #2 (Buy). The company is slated to release earnings on Mar 2.
Tesoro Corporation (TSO) has an Earnings ESP of +1.35% and a Zacks Rank #2. The company is likely to release earnings on Feb 11.
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