We expect energy services holding company AGL Resources Inc. GAS to beat expectations when it reports first-quarter 2015results on Apr 28, before the opening bell.
Last quarter, the company delivered a negative earnings surprise of 16.46%. We note that AGL Resources has underperformed the Zacks Consensus Estimate in the preceding four quarters with an average negative surprise of 13.30%. Let’s see how things are shaping up for this announcement.
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 ingredients.
Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate of $1.51 and the Zacks Consensus Estimate of $1.49 is +1.34%. This is a meaningful indicator of a likely positive earnings surprise.
Favorable Zacks Rank: AGL Resources carries a Zacks Rank #2 (Buy) which, when combined with +1.34% ESP, makes us confident of an earnings beat.
Note that stocks with Zacks Ranks #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
What is Driving the Better-Than-Expected Earnings?
AGL Resources has a relatively low risk earnings growth profile. Positioned in a niche industry with high barriers to entry, this energy services holding company enjoys near-monopoly status in its area of operation. The company also has large and stable customer profile, and strong liquidity position.
Last month, the company announced that during the first two months of this year temperature was colder than normal. This boosted the natural gas demand for room heating purposes – which was favorable for gas distribution and retail businesses of the company. AGL Resources added that the results from its wholesale business during the above mentioned period were also much better than expected.
Other Stocks to Consider
Other stocks in the energy sector that have both a positive Earnings ESP and a favorable Zacks Rank are:
Marathon Petroleum Corporation MPC has an Earnings ESP of +2.13% and a Zacks Rank #1 (Strong Buy). The company is slated to release earnings on Apr 30.
Suncor Energy Inc. SU has an Earnings ESP of +400.00% and a Zacks Rank #2 (Buy). The company is expected to release earnings on Apr 29.
Cenovus Energy Inc. CVE has an Earnings ESP of +36.36% and a Zacks Rank #2. The company is slated to release earnings on Apr 29.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment