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Utility Stock Q1 Earnings Reports on May 9: DUK, SRE & More

Zacks Equity Research

The first-quarter 2017 earnings season is drawing to a close, with nearly 82.4% or 412 S&P 500 members having released their earnings reports as of May 5, 2017. Reported earnings were up 14.2% year over year on 7.3% higher revenues. Among them, 73.3% beat EPS estimates while 67.7% beat revenue estimates.

This week, more than 700 companies are expected to report results, including 43 S&P 500 index members. For the remaining 88 index members (combined with the already reported 412 index members), earnings are estimated to improve 12.7% on 6.2% higher revenues this season.

The trend of earnings releases indicates that this could be the third straight quarter to record earnings growth after five back-to-back declines. Let us now focus on the utility sector, which is characterized by its defensive nature and domestic orientation.

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 in 2016 on account of lower demand. The drop 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 demand and earnings of these companies.

Despite the above negatives, customer growth due to proper cost control, new electric rates and improving economic conditions is helping the utility sector to come out with positive earnings this season. Earnings are expected to improve 3.1% on 5.8% higher revenues this season.

At present, three 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 Preview report.

Let’s take a look at some utilities that are scheduled to report quarterly numbers on May 9.

Sempra Energy, Inc. SRE reported a positive earnings surprise of 7.04% 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.

The company’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.59. 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..

Sempra Energy Price and EPS Surprise

 

Sempra Energy Price and EPS Surprise | Sempra Energy Quote

Sempra Energy is unlikely to beat earnings because it does not have the right combination of the two key ingredients (read more: Can Sempra Energy Pull a Surprise in Q1 Earnings?).

South Jersey Industries, Inc. SJI reported a positive earnings surprise of 2.44% in the prior quarter. The company currently carries a Zacks Rank #2.

South Jersey Industries, Inc. Price and EPS Surprise

 

South Jersey Industries, Inc. Price and EPS Surprise | South Jersey Industries, Inc. Quote

South Jersey‘s Earnings ESP is -4.94%. This is because the Most Accurate estimate stands at 77 cents per share, lower than the Zacks Consensus Estimate of 81 cents. The company is unlikely to beat earnings as it does not have the right combination of the two key ingredients.

Westar Energy Inc. WR reported a negative earnings surprise of 7.32% in the prior quarter. The company currently carries a Zacks Rank #3.

Westar Energy, Inc. Price and EPS Surprise

 

Westar Energy, Inc. Price and EPS Surprise | Westar Energy, Inc. Quote

Westar Energy’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 45 cents. The company is unlikely to beat earnings as it does not have the right combination of the two key ingredients.

Duke Energy Corporation DUK reported in-line earnings in the previous quarter. The company currently carries a Zacks Rank #4(Sell). Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Duke Energy Corporation Price and EPS Surprise

 

Duke Energy Corporation Price and EPS Surprise | Duke Energy Corporation Quote

Duke Energy Corporation’s Earnings ESP is -1.91%. This is because the Most Accurate estimate stands at $1.03 per share, lower than the Zacks Consensus Estimate of $1.05. The company is unlikely to beat earnings as it does not have the right combination of the two key ingredients (read more: Will Duke Energy Disappoint Investors in Q1 Earnings?).

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Duke Energy Corporation (DUK): Free Stock Analysis Report
 
Westar Energy, Inc. (WR): Free Stock Analysis Report
 
Sempra Energy (SRE): Free Stock Analysis Report
 
South Jersey Industries, Inc. (SJI): Free Stock Analysis Report
 
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