The second quarter earnings season is in its early days with only 7% of the S&P 500 members having reported earnings (as of July 15).  Though the season has begun on a fairly upbeat note, the projections are none too encouraging with S&P 500 earnings expected to decline 5.4% on 0.5% lower revenues.

Nine out of the 16 sectors in the Zacks coverage universe are expected to witness an earnings decline. Here we will focus on the Utilities sector, which is expected to grow second-quarter earnings by 20.6% on the back of a 2.4% top-line improvement. The earnings growth rate of Utilities is the highest among the seven sectors which are expected to be in the positive zone this quarter.  Read more details from our weekly  Earnings preview report .

Domestic focus and regulated nature are the main support system of the utility firms. In addition, we do not have any viable alternative for water and electricity, which keeps demand alive even during economic downturns. To provide an uninterrupted supply of these basic amenities the utilities need to upgrade and expand their existing infrastructure.

For this, utilities need to approach the capital markets to arrange for funds. In this situation, the prevailing low interest rate environment is a big boon for the capital intensive industry. Despite a slight rise in interest by the Fed last December, the interest rate had held steady this year due to a host of reasons.  

Choppy recovery in overall market conditions has come in the way of a lift-off time and again. The next hike can unfold in three to six months’ time, but the Brexit referendum and the market turmoil post that might just about stop Fed officials from going into another hike this year.

The Dow Jones Utility Average (DJU) is up 23.1% year to date (till July 18, 2016) compared with the S&P 500 return of 6.0% over the same time frame.

With the second-quarter earnings season unfolding, let us focus on a couple of utilities reporting this week.

Unitil Corporation (UTL Quick QuoteUTL - Free Report) along with its subsidiaries is engaged in the distribution of electricity and natural gas in the United States. It provides utility services to nearly 103,300 electric customers and 78,700 natural gas customers. The company is expected to release second quarter earnings on Jul 21 after the market closes.

The company delivered a 14.29% negative surprise last quarter. Unitil Corporation has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at 13 cents.

With respect to the surprise trend, Unitil Corporation surpassed expectations in only one of the last four quarters, with an average miss of 2.03%.

NorthWestern Corporation (NWE Quick QuoteNWE - Free Report) provides electricity and natural gas to residential, commercial, and industrial customers in the United States. It serves nearly 701,000 customers. The company is expected to release second-quarter earnings on Jul 22 before the market opens.

The company delivered a 9.82% negative surprise last quarter. NorthWestern Corporation has an Earnings ESP of +1.72% and a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for the quarter is pegged at 58 cents.

With respect to the surprise trend, NorthWestern Corporation surpassed expectations in only one of the last four quarters, with an average miss of 2.86%.

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