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Will Xcel Energy (XEL) Disappoint This Earnings Season?

Zacks Equity Research

Xcel Energy Inc. XEL is scheduled to report first-quarter 2017 results before the opening bell on Apr 27. Last quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 3.45%.

Let’s see how things are holding up for the first quarter.

Factors to Consider

Some of the states of Xcel Energy's service territory experienced a warmer January and February, the major winter months, in 2017. This will adversely impact the results in the first quarter of 2017.

Xcel Energy’s long-term debt grew from $8.8 billion in 2011 to $14.2 billion till the fourth quarter of 2016. Xcel Energy’s debt/capital ratio is 56.3% against the industry average of 48.4% and the S&P 500 level of 41.8%. The rise in the debt levels translate into higher interest cost burden, which eats into the company’s margins.

However, the company is hopeful about customer growth in its service territories for both the electric and natural gas businesses and expects a long-term growth of around 0.5%.

In Jan 2017, the company got an approval for the Texas rate case from the commission. The total annual estimated impact of this approval is expected to be about $51.8 million. The final rates will be effective retroactive to Jul 20, 2016. Therefore, we can expect some impact of the same in the first quarter results.

Xcel Energy Inc. Price and EPS Surprise

Xcel Energy Inc. Price and EPS Surprise | Xcel Energy Inc. Quote

Earnings Whispers

Our proven model does not conclusively show that Xcel Energy is likely to beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. Unfortunately, that is not the case here, as you will see below.

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

Zacks ESP: Xcel Energy’s Earnings ESP is -2.0%, as the Most Accurate estimate is pegged at 49 cents while the Zacks Consensus Estimate is 50 cents,.

Zacks Rank: Xcel Energy carries a Zacks Rank #4 (Sell). As it is, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Instead, here are a few players in the Utility sector that have the right combination of elements to post an earnings beat this quarter.

Dominion Resources, Inc. D has an Earnings ESP of +2.15% and a Zacks Rank #3. It is slated to report first-quarter 2017 earnings on May 4.

Pattern Energy Group Inc. PEGI has an Earnings ESP of +300% and a Zacks Rank #3. It is slated to report first-quarter 2017 earnings on May 8.

NiSource, Inc NI has an Earnings ESP of +3.08% and a Zacks Rank #2. It is slated to report first-quarter 2017 earnings on May 3. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here..

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