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Utility Stocks Q1 Earnings Reports on May 2: NRG, WEC & More

Zacks Equity Research

We have already crossed the halfway mark of the firstquarter 2017 earnings season, with nearly 58% of the S&P 500 members releasing their earnings report as of Apr 28, 2017. Reported earnings were up 13.7% year over year on 8.2% higher revenues. Among them, 76.4% beat EPS estimates while 68.1% beat revenue estimates. Meanwhile, nearly 1000 companies are scheduled to report results this week, including 126 S&P 500 members.

For the remaining 212 index members (combined with the already reported 288 index members), earnings are estimated to improve 11.2% on 6.2% higher revenues this season. 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 breakeven for the sector 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, 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 2.

NRG Energy Inc. NRG reported a positive earnings surprise of 1000.0% 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.

NRG Energy’s Earnings ESP is currently pegged at 0.00%. This is because the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at a loss of 41 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.

NRG Energy, Inc. Price and EPS Surprise

 

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

NRG Energy’s is unlikely to beat earnings because it does not have the right combination of two key ingredients

WEC Energy Group WEC reported a negative earnings surprise of 1.61% in the previous quarter. The company currently carries a Zacks Rank #4 (Sell).

WEC Energy Group, Inc. Price and EPS Surprise

 

WEC Energy Group, Inc. Price and EPS Surprise | WEC Energy Group, Inc. Quote

Earnings ESP for WEC Energy Group is +0.94%. This is because the Most Accurate estimate is $1.07 and the Zacks Consensus Estimate stands lower at $1.06. WEC Energy Group is unlikely to beat earnings as it does not have the right combination of the two key ingredients (read more:WEC Energy to Report Q1 Earnings: What's in Store?).

PG&E Corporation PCG reported positive earnings surprise of 3.10% in the prior quarter. The company currently carries a Zacks Rank #3.

Pacific Gas & Electric Co. Price and EPS Surprise

 

Pacific Gas & Electric Co. Price and EPS Surprise | Pacific Gas & Electric Co. Quote

The Earnings ESP for PG&E is -2.41%. This is because the Most Accurate estimate stands at 81 cents while the Zacks Consensus Estimate is pegged higher at 83 cents. PG&E is unlikely to beat earnings as it does not have the right combination of the two key ingredients (read more: PG&E Corp Q1 Earnings: Can the Stock Pull a Surprise?)

Pinnacle West Capital Corporation PNW reported a negative earnings surprise of 4.08% in the previous quarter.

Pinnacle West Capital Corporation Price and EPS Surprise

 

Pinnacle West Capital Corporation Price and EPS Surprise | Pinnacle West Capital Corporation Quote

The company’s Earnings ESP is  -6.25%. This is because the Most Accurate estimate stands at 15 cents whereas the Zacks Consensus Estimate is pegged higher at 16 cents.

Pinnacle West Capital currently carries a Zacks Rank #3. Even though Zacks Rank #3 increases the possibility of an earnings surprise, the company’s Earnings ESP of -6.25% makes earnings beat unlikely this season.

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WEC Energy Group, Inc. (WEC): Free Stock Analysis Report
 
Pinnacle West Capital Corporation (PNW): Free Stock Analysis Report
 
Pacific Gas & Electric Co. (PCG): Free Stock Analysis Report
 
NRG Energy, Inc. (NRG): Free Stock Analysis Report
 
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