Will Consolidated Edison's Earnings Be Strong?

The year 2013 is here, and earnings season has already started ramping up. The key to making smart investment decisions with stocks releasing their quarterly reports 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 kneejerk reaction to news that turns out to be exactly the wrong move.

Let's turn to Consolidated Edison (ED 0.63%). The utility company is looking at a tough quarter, thanks to Hurricane Sandy, and the company's Monday earnings report will give us some more details on just how bad the storm was. Let's take an early look at what's been happening with the utility over the past quarter, and what we're likely to see in its quarterly report.

Stats on Consolidated Edison

Source: Yahoo Finance.

Will Consolidated Edison's earnings hold up?
Consolidated Edison had a tough quarter from a stock-price perspective, with shares having fallen more than 5% over the past three months. Those declines all came in early November, as the company dealt with the aftermath of Hurricane Sandy.

Unfortunately for shareholders, Consolidated Edison was one of many utilities that didn't have a storm reserve set aside to help it deal with Sandy-related costs. That's not entirely uncommon, as Duke Energy (DUK 1.51%) and Dominion Resources (D 0.52%) also lack storm reserves on their books; but Northeast Utilities' (ES 0.82%) Connecticut Light & Power, and other companies that did have storm reserves, will find it easier to deal with the hurricane's costs without having to go before regulators to ask for rate increases.

The more important question going forward is whether local governments will require big capital expenditures for major improvements to infrastructure. With concerns arising about an explosion at one of Consolidated Edison's substations during the Manhattan blackouts following the storm, it's possible that more localized power generation methods may be required. It's unlikely that ConEd will have guidance on this issue in its report, but it's something investors should look forward to in the quarters to come.

Consolidated Edison will report a tough quarter next week, but with expectations fairly low, any good news could be a positive surprise for the stock.

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