Edison International EIX is scheduled to report first-quarter 2018 earnings results on May 1, after the closing bell.

In the last reported quarter, the company delivered a positive earnings surprise of 18.28%. Moreover, it has surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average surprise of 12.35%.

Let’s see how things are shaping up at the company prior to this announcement.

Factors to Consider

In December 2017, South California Edison (SCE), a subsidiary of Edison International, secured wildfire insurance worth $300 million for 2018 and requested the California Public Utility Commission (“CPUC”) to approve recovery of the associated premium worth approximately $121 million. Per the company, this insurance cost might drag its 2018 earnings per share by 29 cents, until the CPUC addresses this request. Moreover, Edison International expects to incur additional insurance costs during the current year, in excess of what the company had requested in its general rate case (GRC).

Consequently, these additional costs are expected to partially weigh on Edison International’s earnings in the quarter to be reported. In line with this, the Zacks Consensus Estimate for the company’s first-quarter earnings reflects an 18.2% decline year over year.

On the flip side, moderate or worse drought conditions extended across southern California at the onset of the first quarter while the state as a whole witnessed a dry winter with temperatures dropping below normal levels. This, in turn, is anticipated to increase household consumption of electricity and thereby boost Edison International’s first-quarter revenues.

However, considering the impact of the latest tax reform, which reduced the corporate tax rate substantially, the company has lately updated its GRC that requested a 2018 revenue requirement of $5.5 billion. This reflects a $106 million decrease from the 2017 revenue requirement.

Therefore, the positive impact of high electricity demand on the company’s top line might get neutralized by the aforementioned revenue requirement reductions. Evidently, the Zacks Consensus Estimate for Edison International’s first-quarter revenues of $2.46 billion represents a drop of 0.2%.

Edison International Price and EPS Surprise

Edison International Price and EPS Surprise | Edison International Quote

Earnings Whispers

Our proven model does not show that Edison International is likely to beat earnings this quarter. This 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. This is not the case here, as you will see below.

Zacks ESP: Edison International has an Earnings ESP of -0.89%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Edison International carries a Zacks Rank #3, which increases the possibility of an earnings beat. However, the company’s negative ESP makes surprise prediction difficult.

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

Stocks to Consider

Here are a few operators in the Utility space that you may consider, as our model shows that they have the right combination of elements to deliver an earnings beat this quarter:

Ameren Corp. AEE has an Earnings ESP of +1.45% and a Zacks Rank #3. The company is scheduled to report first-quarter 2018 results on May 9. You can see the complete list of today’s Zacks #1 Rank stocks here.

Duke Energy DUK has an Earnings ESP of +1.66% and a Zacks Rank #3. The company is scheduled to report first-quarter results on May 10.

Just Energy Group JE has an Earnings ESP of +23.08% and a Zacks Rank #3. The company is expected to report first-quarter results on May 16.

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