When CenterPoint Energy (CNP) reports results for the quarter ending September 2024, Wall Street expects its profit to rise year-over-year on higher revenue. While this widely known consensus outlook is important in assessing the company's earnings position, an important factor depends on how actual results compared to these estimates could affect the near-term share price.

The earnings report, expected to be released on October 28, 2024, could help the stock move higher if these key numbers come in better than expected. However, if they miss, the stock could sink.

While management's discussion of terms and conditions at the earnings release will largely determine the sustainability of the immediate price change and future earnings expectations, it is worth gaining insight into the chances of a positive EPS surprise.

Zacks Consensus Estimate

This utility company is expected to report quarterly earnings of $0.45 per share in its upcoming report, representing a year-over-year change of +12.5%.

Revenue is expected to be $1.93 billion, up 4% from the year-ago quarter.

Estimation of the revision trend

The consensus EPS estimate for the quarter has been revised upward by 1.33% over the past 30 days and is now at current levels. This essentially reflects the way the covering analysts have collectively reassessed their initial estimates over this period.

Investors should keep in mind that an aggregate change may not always reflect the direction of estimate revisions by individual analysts.

Merit whispers

Estimate revisions prior to a company's earnings release provide an indication of business conditions for the period in which the results are reported. These insights form the core of our proprietary surprise prediction model – the Zacks Earnings ESP (Expected Surprise Prediction).

The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate for the quarter. The most accurate estimate is a more recent version of the Zacks Consensus EPS estimate. The idea is that analysts who revise their estimates right before an earnings release have the latest information, which could potentially be more accurate than they and others contributing to the consensus had previously predicted.

Thus, a positive or negative Earnings ESP value theoretically indicates the likely deviation of actual earnings from the consensus estimate. However, the predictive power of the model is only significant for positive ESP values.

A positive Earnings ESP is a strong indicator of earnings growth, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold). Our research shows that stocks with this combination produce a positive surprise nearly 70% of the time, and a solid Zacks Rank actually increases the predictive power of Earnings ESP.

The story continues

Please note that a negative Earnings ESP value is not an indication of a loss of profit. Our research shows that stocks with negative ESPs and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell) are difficult to predict an earnings beat with any degree of certainty.

How have the numbers developed for CenterPoint?

For CenterPoint, the Most Accurate Estimate is higher than the Zacks Consensus Estimate, suggesting that analysts have recently become more optimistic about the company's earnings outlook. This has resulted in an Earnings ESP of +5.62%.

On the other hand, the stock currently has a Zacks Rank of #4.

So this combination makes it difficult to conclusively predict that CenterPoint will beat the consensus EPS estimate.

Does the history of earnings surprises provide any clues?

Analysts often consider the extent to which a company has been able to meet consensus estimates in the past while calculating their estimates for their future earnings. So it's worth taking a look at the surprise story to assess its influence on the coming number.

For the most recently reported quarter, CenterPoint was expected to report earnings of $0.33 per share when the company actually produced earnings of $0.36, a surprise of +9.09%.

Over the last four quarters, the company has surpassed consensus EPS estimates three times.

Conclusion

Above- or below-average earnings may not be the sole basis for a stock to rise or fall. Many stocks end up losing ground despite a decline in earnings due to other factors that disappoint investors. Similarly, unforeseen catalysts are helping a number of stocks rise despite a lack of earnings.

However, betting on stocks that are expected to beat earnings expectations increases the chances of success. For this reason, it's worth checking a company's Earnings ESP and Zacks Rank before its quarterly release. Make sure to use our Earnings ESP filter to find the best stocks to buy or sell before they are reported.

CenterPoint doesn't appear to be a compelling candidate for earnings growth. However, investors should also consider other factors to bet on this stock or stay away from it before its earnings release.

The expected results of an industry player

Another stock in the Zacks Utility – Electric Power industry, NextEra Energy (NEE), is expected to soon report earnings of $1.08 per share for the quarter ending September 2024. This estimate suggests a change of +14.9% year-over-year. Quarterly revenue is expected to be $8.17 billion, up 13.9% from the year-ago quarter.

The consensus EPS estimate for NextEra has remained unchanged over the past 30 days. However, a lower Most Accurate Estimate has resulted in an ESP of -7.41%.

This Earnings ESP combined with its Zacks Rank #3 (Hold) makes it difficult to conclusively predict that NextEra will beat the consensus EPS estimate. The company beat consensus EPS estimates in each of the last four quarters.

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CenterPoint Energy, Inc. (CNP): Free stock analysis report

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