NextEra Energy (NEE) Q3 Earnings: Will The Stock Surprise?

Diversified utility NextEra Energy Inc. (NYSE:NEE) is scheduled to report third-quarter 2016 results on Oct 31, before the market opens. Last quarter, the company reported a positive earnings surprise of 5.70%. Let’s see how things are shaping up for this quarter.

Factors to Consider

NextEra Energy has nuclear generation assets, which involve heavy expenses in order to comply with government regulations. This tends to weigh on NextEra Energy’s profitability to a large extent.

Further, the Woodford Project investment has been removed from customer recovery, which might impact third-quarter earnings.

On the flip side, above-average temperatures in the company’s service territories are expected to aid the top line by driving electricity sales. Further, Florida’s unemployment rate was well below the national average in the third quarter, indicating improving economic fundamentals that would contribute to the company’s bottom line by boosting demand for utility services.

As part of the company’s plan of bringing 4,000 megawatts (MW) of renewables into service over the 2015–2016 period, approximately 2,500 MW will be brought into service in the second half of this year itself.

Earnings Whispers

Our proven model does not conclusively show that NextEra Energy will beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. But that is not the case here, as you will see below.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.65.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

Zacks Rank: Though NextEra Energy’s Zacks Rank #3 increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are a few stocks in the utility space worth considering on the basis of our model, as they have the right combination of elements to post an earnings beat this quarter:

CMS Energy Corp. (NYSE:CMS) scheduled to report earnings on Oct 27. It is has an Earnings ESP of +3.33% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avista Corp. (NYSE:AVA) has an Earnings ESP of +4.76% and a Zacks Rank #2. It is slated to report earnings on Nov 1.

Duke Energy Corporation (NYSE:DUK) has an Earnings ESP of +1.29% and a Zacks Rank #3. It is slated to report earnings on Nov 4.

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