Utility Stocks' Q3 Earnings Due on Oct 31: ETR, AEE, WEC
As of Oct 24, 3.4% of Utility stocks released quarterly results, reflecting 18.7% earnings growth year over year. However, revenues dropped 8.1% over the same time period. Per the latest Earnings Outlook, the overall Q3 picture for the Utility sector is a mixed one.
Evidently, total earnings for the Utilities are anticipated to increase 6.6% from the same period last year, while revenues are expected to decline 1.4%. In particular, factors like new rates in their service territories, customer growth, effective management and control of expenses through the introduction of new technology are expected to boost third-quarter earnings for the Utility stocks.
Nevertheless, there remain a few challenges such as a rising debt level, stringent regulations and the hurricane season. For instance, with the Utility sector being a capital-intensive one, interest rate hikes increase the utilities' cost of capital, thereby weighing on margins and compromising their ability to pay or raise dividend rates. With the Federal Reserve having increased interest rates in September, marking the eighth hike since December 2015, the credit market does not seem very favorable for Utility stocks.
Furthermore, unemployment rate in the United States during the end of third quarter touched 3.7%. This historic low level of unemployment boosted the demand for new housing units and in turn the requirement for utility services.
Per a U.S. Energy Information Administration ("EIA") report, total electricity generation in the United States will touch 11.397 billion kWh per day in 2018, up 8.5% year over year, while total retail electric sales for the year will reach 10.38 billion kWh a day, up 2.9% year over year. Such predictions mirror the Utilities’ significant earnings generating capabilities, which in turn are expected to get duly reflected in the Q3 results of the majority companies in this space.
Now let's take a look at the following Utility stocks that are scheduled to report third-quarter 2018 earnings on Oct 31 and find out how things are shaping up prior to the announcement.
Entergy Corp. ETR delivered a positive earnings surprise of 42.06% in the last reported quarter. Notably, the company outperformed the Zacks Consensus Estimate in the trailing four quarters, the average being 29.72%.
A total of 251 storm reports were recorded across majority parts of Entergy’s service territories during August. This may have caused a few outages, resulting in the disruption of smooth power supply for the company’s customers. Consequently, Entergy's revenues in the to-be-reported quarter are expected to decline.
However, Entergy expects macroeconomic factors to boost industrial growth across its service territories in the current reporting cycle. This, in turn, should drive demand for electricity, thereby adding an impetus to the company’s growth.
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has good chance of beating estimates if it also has a positive Earnings ESP. Impressively, Entergy constitutes that right combination. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Entergy has an Earnings ESP of +3.60% and a Zacks Rank #1, which makes us reasonably confident of an earnings beat this quarter (read more: Is Entergy Corporation Poised to Beat on Q3 Earnings?).
Conversely, 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.
Entergy Corporation Price and EPS Surprise
Entergy Corporation Price and EPS Surprise | Entergy Corporation Quote
Ameren Corp. AEE delivered a positive earnings surprise of 22.78% in the last reported quarter. The company outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 9.76%.
Ameren expects third-quarter earnings to gain from an increased transmission and electric distribution infrastructure investment. The company also anticipates its bottom line to grow on account of lower refueling and maintenance outage at Ameren Missouri.
Ameren has an Earnings ESP of +8.65% and a Zacks Rank #1, which increases the chances of an earnings beat this quarter (read more: Is a Beat in the Cards for Ameren in Q3 Earnings?).
You can see the complete list of today’s Zacks #1 Rank stocks here.
Ameren Corporation Price and EPS Surprise
Ameren Corporation Price and EPS Surprise | Ameren Corporation Quote
WEC Energy Group, Inc. WEC delivered a positive earnings surprise of 10.61% in the last reported quarter. The company outperformed the Zacks Consensus Estimate in the trailing four quarters, with an average beat of 6.03%.
WEC Energy has an Earnings ESP of +1.41% a Zacks Rank #2, which increases our predictive power for a beat this quarter.
WEC Energy Group, Inc. Price and EPS Surprise
WEC Energy Group, Inc. Price and EPS Surprise | WEC Energy Group, Inc. Quote
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