Atlantic Power Faces a Make-or-Break Quarter

On Wednesday, Atlantic Power (NYSE: AT  ) 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.

Atlantic Power is a little-known utility that serves areas in the U.S. and Canada. Until recently, the company was popular for its high dividend yield, but that mark of distinction proved fleeting, leaving investors with a big dilemma. Let's take an early look at what's been happening with Atlantic Power over the past quarter and what we're likely to see in its quarterly report.

Stats on Atlantic Power

Analyst EPS Estimate


Year-Ago EPS


Revenue Estimate

$121.73 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Can Atlantic Power ever recover?
Analysts have gotten extremely pessimistic about Atlantic Power's future earnings prospects, having reversed initial estimates a few months ago for a first-quarter gain and having more than tripled their loss estimates for the full 2013 year. The stock has delivered a frightful performance, plunging more than 60% since late January.

The big reason for Atlantic Power's drop came in its unexpectedly bad fourth-quarter earnings report in late February. Revenue fell 9% from the year-ago quarter, missing expectations by more than 25%, and the company's per-share loss came in roughly 10 times what analysts had anticipated. Even worse, Atlantic Power cut its dividend by almost two-thirds, and only the stock's plunge has kept its yield high, at 8% currently.

Since then, Atlantic Power has made a number of moves to try to shore up its business. The company sold its interest in its Path 15 transmission project to a joint venture including Duke Energy (NYSE: DUK  ) for almost $200 million in cash and assumed debt. The move basically puts Atlantic Power all-in on its natural gas prospects, and with prices of nat-gas starting to rebound, that decision could prove a costly one going forward.

Yet the big question facing Atlantic Power is whether its dividend reduction will be enough to turn its prospects around. Exelon (NYSE: EXC  ) made its own payout cut of 40% in February, but its stock has actually risen in light of the announcement, as investors believe that the company will be better off with its new payout policy. Atlantic Power, by contrast, is facing shareholder lawsuits about its dividend cut.

In Atlantic Power's report, watch for comments about whether it has made progress in renewing some of its important contractual agreements. With so much uncertainty, any good news Atlantic Power can muster could make a big difference for investors.

Like Atlantic Power, Exelon cut its dividend recently. But investors are excited that 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 recent merger with Constellation, places it 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.

Click here to add Atlantic Power to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

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Related Tickers

9/29/2016 11:35 AM
AT $2.50 Down -0.01 -0.56%
Atlantic Power CAPS Rating: **
DUK $80.19 Down -0.91 -1.12%
Duke Energy CAPS Rating: ***
EXC $33.55 Down -0.46 -1.35%
Exelon CAPS Rating: ****