NextEra Energy Inc. (NEE) will release its fourth quarter 2014 financial results before the market opens on Jan 27, 2015. In the prior quarter, this utility reported a positive earnings surprise of 0.65%. NextEra Energy currently has a Zacks Rank #3 (Hold). Let’s see how things are shaping up at NextEra prior to this announcement.
Factors to Consider this Quarter
During the fourth quarter, NextEra Energy entered into a definitive agreement to acquire Hawaiian Electric Industries, Inc. (HE) for a total consideration of $4.3 billion. With the Hawaiian electric acquisition, NextEra will further expand its footprint in the regulated market.
The ongoing improvement in the Florida economy resulting in a declining unemployment rate and increasing housing permits has created fresh demand for utility services. This will boost the prospects of utility operators like NextEra.
Higher revenues notwithstanding, spiraling costs could impact NextEra’s margins.
Though the company has widened its renewable portfolio it also has substantial nuclear generation assets, the operation and maintenance of which, as per government regulations, involve heavy expenses. This can undermine NextEra’s profitability to a large extent.
Earnings Whispers
Our proven model does not conclusively show that NextEra Energy is likely to beat earnings estimates this quarter. That is because a stock needs to have both a positive Zacks Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here.
Negative ESP: This is because the Most Accurate estimate stands at 99 cents per share, lower than the Zacks Consensus Estimate of $1.04 per share, resulting in a -4.81% ESP.
Zacks Rank #3 (Hold): NextEra Energy’s Zacks Rank #3 combined with a -4.81% ESP makes an earnings beat unlikely.
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.
Other Stocks to Consider
Here are some companies tied to the Electric utility industry 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 +2.78% and carries a Zacks Rank #2 (Buy).
PNM Resources, Inc. (PNM) has an earnings ESP of +8.70% and carries a Zacks Rank #2 (Buy).
Wisconsin Energy Corp. (WEC) has an earnings ESP of +1.75% and carries a Zacks Rank #2 (Buy).
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