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Utility Stocks' Q4 Earnings to Watch on Feb 1: PPL, D, WEC

Zacks Equity Research

The Q4 earnings season is picking up pace and we saw earnings releases by 170 S&P 500 members last week. Reported earnings were up 6% year over year on 3.1% higher revenues. This may well be one of the busiest weeks of this earnings season, with 413 companies (including 106 S&P members) lining up to release financial results.

For the remaining index members, projections are of a 5.2% improvement in earnings on 4.0% higher revenues despite expectations of growth in the negative territory for five of the 16 sectors in our coverage. In previous quarter, overall earnings growth was 3.8% on 2.3% higher revenues. This could be the second quarter to record positive growth following five quarters of back-to-back declines.

Notably, utility is among the 11 sectors in the Zacks coverage universe that are expected to record growth in the positive territory this season. Read more details in our weekly Earnings Preview report.

Donald Trump’s Presidency is expected to benefit defensive and domestic-oriented utilities immensely. During his election campaign, Trump had vowed to lower the regulatory pressure on domestic manufacturers and suggested increased investment in energy infrastructure. If the new administration indeed starts working on these lines, the entire utility sector is bound to get a boost.

Utilities are also characterized by their need for a continuous inflow of funds to execute organic growth and infrastructure upgrade projects. This is essential in maintaining an uninterrupted supply of basic amenities like electricity, fresh water and gas. They take recourse to external sources of financing to meet their capital requirements.

The Federal Reserve raised the interest rate in Dec 2016. Going forward, Fed officials hint at further interest rate hikes in 2017, provided that the overall economic conditions are conducive for such a move. We believe that a rising interest rate environment could add to the woes of utility operators, as it will increase their cost of capital, limiting their ability to pay consistent dividends

In the fourth quarter of 2016, utility sector earnings are expected to be up 3.0% on 15.2% higher revenues.

Utilities Sector 5YR % Return

Utilities Sector 5YR % Return

Let’s focus on a few utilities that are scheduled to report fourth-quarter numbers on Feb 1.

PPL Corporation PPL reported a positive earnings surprise of 6.78% last quarter. The company currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

PPL Corporation Price and EPS Surprise

 

PPL Corporation Price and EPS Surprise | PPL Corporation Quote

PPL Corporation’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at 0.00% as both estimates are pegged at 52 cents. According to our proven model, stocks with the combination of a Zacks Rank #1 (Strong Buy) #2 (Buy) or #3 and a positive ESP are likely to beat estimates. (Read more: PPL Corp Q4 Earnings: Will the Stock Pull a Surprise?)

Dominion Resources D reported a positive earnings surprise of 9.62% last quarter. The company currently carries a Zacks Rank #3.

Dominion Resources, Inc. Price and EPS Surprise

 

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

It has an Earnings ESP of -1.00% as the Most Accurate estimate of 99 cents is slightly lower than the Zacks Consensus Estimate of $1.00. (Read more:Dominion Q4 Earnings: What's in Store for the Stock?)

WEC Energy Group WEC reported a positive earnings surprise of 15.00% last quarter. The company currently carries a Zacks Rank #2.

WEC Energy Group, Inc. Price and EPS Surprise

 

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

Its Earnings ESP stands at -3.23% since the Most Accurate estimate is pegged at 60 cents while the Zacks Consensus Estimate stands at 62 cents,. (Read more:WEC Energy Earnings: What Awaits the Stock in Q4?)

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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WEC Energy Group, Inc. (WEC): Free Stock Analysis Report
 
Dominion Resources, Inc. (D): Free Stock Analysis Report
 
PPL Corporation (PPL): Free Stock Analysis Report
 
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