ALLETE Earnings Preview

After beating estimates last quarter by $0.01, ALLETE (NYSE: ALE  ) has set the standard for itself. The company will unveil its latest earnings on Wednesday, Nov. 2. ALLETE, together with its subsidiaries, is engaged in the generation, transmission, and distribution of electric power in the United States.

What analysts say:

• Buy, sell, or hold?: Analysts strongly back ALLETE, with three of five rating it a buy and the remainder rating it a hold. Analysts like ALLETE better than competitor CH Energy Group overall. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared to three months ago.
• Revenue forecasts: On average, analysts predict $233.5 million in revenue this quarter. That would represent a rise of 4.2% from the year-ago quarter.
• Wall Street earnings expectations: The average analyst estimate is earnings of $0.54 per share. Estimates range from $0.52 to $0.57.

What our community says:
CAPS All-Stars are solidly behind the stock with 95.8% assigning it an "outperform" rating. The community at large agrees with the All-Stars with 81.7% granting it a rating of "outperform." Fools are bullish on ALLETE, though the message boards have been quiet lately with only 28 posts in the past 30 days. Despite the majority sentiment in favor of ALLETE, the stock has a middling CAPS rating of three out of five stars.

Management:
ALLETE's profit has risen year over year by an average of 10.7% over the past five quarters. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 2.5 percentage points in the last quarter. Revenue rose 4.1% while cost of sales rose 7.5% to $171.7 million from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross and net margins over the past four quarters.

Quarter	Q2	Q1	Q4	Q3
Gross Margin	21.9%	30.2%	18.2%	24.7%
Net Margin	7.7%	15.4%	5.6%	8.7%

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