The Q1 earnings season is approaching the halfway mark. As of Apr, 26, 2017, 181 S&P 500 members reported their earnings results. Total earnings for these companies are up 10.0% from the same period last year on 4.6% higher revenues. Among them, 75.7% beat EPS estimates while 62.1% beat revenue estimates. Meanwhile, nearly 800 companies are scheduled to report results this week, including 191 S&P 500 members.
For the remaining 319 index members, earnings are estimated to improve 9.7% on 5.9% higher revenues. Notably, this could be the third straight quarter to record positive earnings growth after five quarters of back-to-back declines.
Let us now focus on the utility sector, which is characterized by its defensive nature and domestic orientation. Earnings are expected to drop 0.5% this season.
The utility sector is also known for its capital-intensive nature. This is because these companies need huge capital to set up generation facilities, and transmission and distribution infrastructure. They also require considerable funds to upgrade the existing systems in order to meet emission control standards. Utilities have been benefiting from the rock-bottom interest rate environment. However, the Federal Reserve raised interest rates for two consecutive quarters (Dec 2016 and Mar 2017), which will definitely hurt the utilities.
As per the U.S. Energy Information Administration (EIA), total U.S. electricity generation from utility-scale plants is expected to decline 0.7% per day in 2017 from 11,140 gigawatt hours per day in 2016 on account of lower demand. The drop in electricity generation will more than offset the expected rise in electricity prices in 2017 and will mar the prospects of utilities as well.
Moderate winter weather in most parts of the U.S. is not going to help the utilities either and is likely to have an adverse impact on the demand and earnings of these companies.
At present, four out of the 16 sectors in the Zacks coverage universe are expected to witness an earnings decline this season. Read more details in our weekly Earnings Outlook report.
Let’s take a look at some utilities that are scheduled to report quarterly numbers on Apr 28.
Public Service Enterprise Group Inc. PEG reported a positive earnings surprise of 3.85% in the previous quarter. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Public Service Enterprise’s Earnings ESP is currently pegged at -1.19%. This is because the Most Accurate estimate stands at 83 cents, lower than the Zacks Consensus Estimate of 84 cents. According to our proven model, only those stocks which have both a positive ESP and a Zacks Rank #1, 2 (Buy) or 3 have increased chances of beating estimates. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Public Service Enterprise Group Incorporated Price and EPS Surprise
Public Service Enterprise Group Incorporated Price and EPS Surprise | Public Service Enterprise Group Incorporated Quote
Public Service Enterprise is unlikely to beat earnings because it does not have the right combination of two key ingredients (read more:What Awaits Public Service Enterprise in Q1 Earnings?).
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
PNM Resources Inc. PNM reported positive earnings surprise of 9.68% in the prior quarter. The company currently carries a Zacks Rank #4.
PNM Resources, Inc. (Holding Co.) Price and EPS Surprise
PNM Resources, Inc. (Holding Co.) Price and EPS Surprise | PNM Resources, Inc. (Holding Co.) Quote
The Earnings ESP for PNM Resources is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 25 cents. PNM Resources is unlikely to beat earnings as it does not have the right combination of the two key ingredients
Portland General Electric Company POR reported a positive earnings surprise of 4.62% in the previous quarter. The company currently carries a Zacks Rank #3.
Portland General Electric Company Price and EPS Surprise
Portland General Electric Company Price and EPS Surprise | Portland General Electric Company Quote
Portland General Electric’s Earnings ESP is currently pegged at -2.44%. This is because the Most Accurate estimate stands at 80 cents whereas the Zacks Consensus Estimate is pegged higher at 82 cents.
Hence, Portland General Electric is unlikely to beat earnings as it does not have the right combination of the two key ingredients
Calpine Corporation CPN reported a negative earnings surprise of 700.0% in the previous quarter.
Calpine Corporation Price and EPS Surprise
Calpine Corporation Price and EPS Surprise | Calpine Corporation Quote
The company’s Earnings ESP is currently pegged at +11.77%. This is because the Most Accurate estimate stands at a loss of 15 cents whereas the Zacks Consensus Estimate is pegged at a loss of 17 cents.
Calpine Corporation currently carries a Zacks Rank #5 (Strong Sell). This, combined with the company’s ESP of +11.77%, makes a beat unlikely this season.
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