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Utility Stocks Q1 Earnings Reports on May 4: D, PPL & More

Zacks Equity Research

We have already crossed the halfway mark of first-quarter 2017 earnings season, with nearly 58% or 288 members of the S&P 500 members having released their earnings reports 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.

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. The trend of earnings releases indicates that this could be the third straight quarter to record earnings growth after five quarters of back-to-back declines.

This is going to be another busy week for this season, with nearly 1000 companies scheduled to report results this week, including 126 S&P 500 members. Let us now focus on the utility sector, which is characterized by its defensive nature and domestic orientation. Earnings are expected to break even 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 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.

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 4.

Dominion Resources Inc. D reported a negative earnings surprise of 1.00% 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 +2.15%. This is because the Most Accurate estimate is 95 cents while the Zacks Consensus Estimate stands lower at 93 cents. According to our proven model, only those stocks which have both a positive ESP and a Zacks Rank #1, 2 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.

Dominion Resources, Inc. Price and EPS Surprise

 

Dominion Resources, Inc. Price and EPS Surprise | Dominion Resources, Inc. Quote

 

Dominion is likely to beat earnings because it has the right combination of the two key ingredients (read more: Is Dominion Resources Poised for a Beat in Q1 Earnings?).

PPL Corporation PPL reported a positive earnings surprise of 15.38% in the previous quarter. The company currently carries a Zacks Rank #3.

PPL Corporation Price and EPS Surprise

 

PPL Corporation Price and EPS Surprise | PPL Corporation Quote

 

Earnings ESP for PPL Corporation is +1.61%. This is because the Most Accurate estimate is 63 cents, higher than the Zacks Consensus Estimate of 62 cents. PPL Corporation is likely to beat earnings as it has the right combination of the two key ingredients (read more: Is a Surprise in Store for PPL Corp in Q1 Earnings?).

Consolidated Edison ED reported a positive earnings surprise of 2.99% in the prior quarter. The company currently carries a Zacks Rank #3.

The Earnings ESP for Consolidated Edison is -1.68%. This is because the Most Accurate estimate stands at $1.17, lower than the Zacks Consensus Estimate of $1.19.

Consolidated Edison Inc Price and EPS Surprise

 

Consolidated Edison Inc Price and EPS Surprise | Consolidated Edison Inc Quote


Consolidated Edison is unlikely to beat earnings as it does not have the right combination of the two key ingredients (read more: Consolidated Edison Q1 Earnings: What's in the Cards?).

Ameren Corporation AEE reported a negative earnings surprise of 13.33% in the prior 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.

Ameren Corporation Price and EPS Surprise

 

Ameren Corporation Price and EPS Surprise | Ameren Corporation Quote


The Earnings ESP for Ameren Corporation is -2.38%. This is because the Most Accurate estimate stands at 41 cents, lower than the Zacks Consensus Estimate of 42 cents. Ameren Corporation is unlikely to beat earnings as it does not have the right combination of the two key ingredients (read more:Will Ameren Corporation Disappoint in Q1 Earnings?).

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Ameren Corporation (AEE): Free Stock Analysis Report
 
Consolidated Edison Inc (ED): Free Stock Analysis Report
 
Dominion Resources, Inc. (D): Free Stock Analysis Report
 
PPL Corporation (PPL): Free Stock Analysis Report
 
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