PG&E Corporation (PCG - Analyst Report) is set to report fourth-quarter 2014 earnings results before the market opens on Feb 10, 2015. Last quarter, it delivered a positive earnings surprise of 50.43%. Let’s see how things are shaping up for this announcement.

Factors to Consider

PG&E Corporation, based out of San Francisco, CA is the parent holding company of California’s largest regulated electric and gas utility, Pacific Gas and Electric Company (Pacific Gas). The company serves nearly 15 million customers. The company surpassed expectations in two out of the last four quarters, with an average beat of 6.71%.

Pacific Gas has completed a system-wide replacement of old cast iron gas pipelines across northern and southern California on schedule. In a major milestone, the utility replaced 874 miles of iron gas pipelines in its 70,000 square-mile service area by year-end 2014.

The old gas distribution cast iron pipelines were installed decades ago, which were subject to natural wear and tear and led to leakage and pipeline accidents. In fact, PG&E faces a $1.4 billion fine for a gas pipeline explosion in a San Francisco suburb that killed eight people in 2010. The penalty has however not been finalized.

Sensing the importance of replacing the obsolete pipelines, PG&E initiated its Gas Pipeline Replacement Program. The utility set itself a goal of replacing 30 miles of cast iron pipeline per year. The removal of the cast iron pipelines will certainly lower the possibility of fatal accidents.

It is worth mentioning here that the San Bruno accident continues to cast a shadow on the company’s financial results. PG&E said that penalties as well as upgrades may cost shareholders about $4.75 billion. This includes the $2.7 that billion PG&E has already committed for safety-related work following the San Bruno incident over the next several years.

Earnings Whispers?

Our proven model does not conclusively show that PG&E Corporation is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: PG&E Corporation has an ESP of -1.85%. This is because the Most Accurate estimate is at 53 cents and the Zacks Consensus Estimate stands at 54 cents per share, resulting in a negative ESP.

Zacks Rank: PG&E Corporation’s Zacks Rank #2 increases the predictive power of the ESP. However, the company’s ESP of -1.85% makes earnings beat call difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks in the utility space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this season:

DTE Energy Corp. (DTE - Analyst Report) has an Earnings ESP of +5.83% and a Zacks Rank #3.

Wisconsin Energy Corp. (WEC - Analyst Report) has an Earnings ESP of +1.75% and a Zacks Rank #2.

PNM Resources, Inc. (PNM - Snapshot Report) has an Earnings ESP of +8.70% and a Zacks Rank #2.