For Immediate Release
Chicago, IL – February 21, 2013 – Today, Zacks Equity Research discusses the U.S. Utilities, including Alliant Energy Corporation (LNT), Ameren Corporation (AEE), Aqua America, Inc. (WTR), Otter Tail Corporation (OTTR) and TransAlta Corporation (TAC).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
The demand for utility services is primarily driven by the state of the economy, modernization & urbanization, expansion of infrastructure and weather.
Economy: The state of the economy is the primary driver of the utilities. A steady and improving economy acts as a tailwind for the utility sector. At present, the steep public debt in the U.S. is putting downward pressure on government spending and the economy at large. This affects the demand for utility services from the industrial and commercial sectors.
Housing: Improvement in the economy lowers unemployment rates and as a consequence increases the demand for housing. An improving housing sector outlook will also drive demand for utility services.
Population: Population has a direct link with the demand for utility services. Higher density and increase in population drive the requirement for essential services.
Weather: Weather plays a crucial role for utilities. A normal weather pattern throughout the year ensures steady demand for utility services. However, extreme conditions tend to reinvigorate demand.
Earnings and Zacks Rank
Within the Zacks Industry classification, Utilities are a stand-alone sector, one of 16 Zacks sectors. The rural wire-line telephone companies are also grouped within the Zacks Utility sector, but the three major industries within this sector include Electric Power, Gas Distribution and Water Supply. The Utility sector’s defensive attributes reflect the group’s lack of correlation with the broader market/economy. Of course, the sector’s reputation as a dividend payer also adds to its perceived defensiveness.
We rank all of the more than 250 industries in the 16 Zacks sectors based on the earnings outlook for the constituent companies in each industry. This ranking is available in the Zacks Industry Rank http://www.zacks.com/rank/industry.php
The way to look at the complete list of Zacks Industry Rank for the 250+ companies is that the outlook for the top one-third of the list (Zacks Industry Rank of #85 and lower) is positive, while the outlook for the bottom one-third (Zacks Industry Rank #170 and higher) is negative.
All three industries in the Utility sector are currently ranked in the middle 1/3rd, with Gas Distribution at Zacks Industry Rank #95, Electric Power at Zacks Industry Rank of #103 and Water Supply at Zacks Industry Rank #170. The exact location of the three mining industries on the Zacks Industry Rank aside, one could safely say that the near-term outlook for the group is leaning towards a Neutral outlook.
Zacks Rank indicates the movement of the stocks over the short term (1 to 3 months). The rank along with Expected Surprise Prediction (ESP) (Read: Zacks Earnings ESP: A Better Method) helps in predicting the probability of earnings surprises.
The names with a Zacks Rank #1 (Strong Buy) include Alliant Energy Corporation (LNT), Ameren Corporation (AEE), Aqua America, Inc. (WTR), Otter Tail Corporation (OTTR) and TransAlta Corporation (TAC), among others.
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