We expect FirstEnergy Corp. (FE) to beat expectations when it reports fourth quarter 2014 results on Feb 17, after market close.

Last quarter, FirstEnergy posted a 1.14% positive earnings surprise. On its third-quarter earnings call, the company reiterated its 2014 earnings guidance in the range of $2.40 to $2.60 per share. Let’s see how things are shaping up for this announcement.

What’s Driving the Better-than-Expected Results?

FirstEnergy operates one of the largest transmission networks in the U.S. and systematically invests capital to improve its quality of services. In 2014, the company has substantially invested in its service areas to enhance the reliability of electric systems.

The utility also added transmission lines to meet the increasing demand for electricity thanks to the shale gas boom. In the fourth quarter, FirstEnergy accomplished a 3.5-mile, 138-kilovolt (kV) transmission line to support the Springfield Township’s Pennant Midstream natural gas processing facility located in Mahoning County, OH.

FirstEnergy also announced that its Jersey Central Power & Light unit has installed 15 advanced recloser devices on three circuits in the Morris County communities in the quarter. This technology offers a wide array of benefits to the company as well as its customers. These installations will help the company locate and restore power outages quickly and reduce operational costs.

Why a Likely Positive Surprise?

Our proven model shows that FirstEnergy is likely to beat earnings because it has the right combination of two key ingredients.

Positive Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +1.33%. This is because the Most Accurate Estimate is at 76 cents while the Zacks Consensus Estimate is at 75 cents.  This is a meaningful and leading indicator of a likely positive earnings surprise for the shares.

Zacks Rank: FirstEnergy currently carries a Zacks Rank #3 (Hold). Note that stocks with Zacks Ranks #1 (Strong Buy), 2 (Buy) and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  
The combination of FirstEnergy’s Zacks Rank #3 and +1.33% ESP makes us confident of an earnings beat this season.

Other Stocks to Consider

FirstEnergy is not the only firm looking up this earnings season. We also see likely earnings beats coming from these three industry peers.

Dynegy Inc. (DYN) has an earnings ESP of +78.13% and a Zacks Rank #3.

Edison International (EIX) has an earnings ESP of +4.94% and a Zacks Rank #3.

OGE Energy Corp. (OGE) has an earnings ESP of +11.11% and a Zacks Rank #3.