What's Holding EnerNOC's Earnings Back?

Next Monday, EnerNOC (NASDAQ: ENOC  ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

EnerNOC aims to act as a bridge between power suppliers and users, helping to implement strategies that match up supply generation with power demand. That's been a huge growth industry for businesses trying to cut power costs. Let's take an early look at what's been happening with EnerNOC over the past quarter and what we're likely to see in its quarterly report.

Stats on EnerNOC

Analyst EPS Estimate

($1.09)

Year-Ago EPS

($1.06)

Revenue Estimate

$31.13 million

Change From Year-Ago Revenue

27%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

When will EnerNOC's earnings power up?
Over the past few months, analysts have had conflicting views of EnerNOC's earnings prospects. On one hand, they've widened their loss estimates for the just-ended quarter by more than $0.20 per share. Yet further out, they've boosted their full-year 2013 consensus by a dime per share, apparently expecting the company to make up for the shortfall later in the year. The stock is focusing on the long-term, with a 10% gain since late January.

The idea behind EnerNOC's business is simple yet highly innovative, as it signs up customers that are willing to allow EnerNOC to manage their electricity usage. During peak demand times, EnerNOC reduces its customers' usage, earning money from utilities and power-grid-management companies. Part of those payments go back to customers, while the rest represents EnerNOC's revenue.

The main challenge that EnerNOC faces is that changing weather conditions can have a dramatic impact on the company's results. In February, the company announced a loss equal to about 60% of its revenue, and despite the company's expectations that it will reverse its full-year 2012 loss and earn a profit in 2013, EnerNOC will benefit if extreme conditions provide frequent opportunities to earn revenue from power suppliers.

Yet EnerNOC will also have to deal with increasing competition. Exelon's (NYSE: EXC  ) Constellation Energy unit has a strong demand-response business of its own, with its VirtuWatt Link application allowing customers to analyze and implement load-response strategies. More broadly, major utilities Southern (NYSE: SO  ) and Duke Energy (NYSE: DUK  ) have identified the threat that EnerNOC and other edge-power players represent to their business models, and they're looking at several steps to defend their turf, such as moving into the rooftop solar installation business.

In EnerNOC's report, watch closely for the company to provide more color on how exactly it plans to reach profitability for the full 2013 year. Without more details, starting with such a big first-quarter loss will make it tough for EnerNOC to earn it back throughout the rest of the year.

EnerNOC's challenge notwithstanding, Exelon is perfectly positioned to capitalize on having the largest nuclear fleet in North America. This strength, combined with an increased focus on balance sheet health and its merger with Constellation, places Exelon and its resized dividend on a short list of the top utilities. To determine if Exelon is a good long-term fit for your portfolio, you're invited to check out The Motley Fool's premium research report on the company. Simply click here now for instant access.

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  • Report this Comment On May 03, 2013, at 5:46 PM, jimmy4040 wrote:

    "What's Holding EnerNOC's Earnings Back?"

    A better question, what on earth is holding the stock price up?

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