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PG&E Corp (PCG) to Report Q2 Earnings: Is a Beat in Store?

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PG&E Corporation (PCG - Free Report) is set to report second-quarter 2017 financial results on Jul 27, before the market opens.

Last quarter, the company posted an earnings surprise of 27.71%. However, the company surpassed the Zacks Consensus Estimate in two of the past four quarters, with an average negative earnings surprise of 3.38%.

Let’s see how things are shaping up at the company prior to this announcement.

Why a Likely Positive Surprise?

Our proven model shows that PG&E Corp is likely to beat earnings because it has the right combination of the two key ingredients.

Zacks ESP: PG&E Corp has an Earnings ESP of +5.06%. This is because the Most Accurate estimate stands at 83 cents, higher than the Zacks Consensus Estimate of 79 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PG&E Corp carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating earnings estimates.

Notably, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Meanwhile, PG&E Corp’s combination of a Zacks Rank #3 and +5.06% ESP makes us reasonably certain of an earnings beat.

What’s Driving the Better-Than-Expected Earnings?

PG&E Corp boasts a solid portfolio of regulated utility assets that offer a stable earnings base and substantial long-term growth potential.

In early 2017, the company projected to save $300 million in cost-efficiency measures for 2017. Through the year, management expects the company to remain on track for achieving the target of offering affordable service to its customers. We may expect the soon-to-be released second-quarter results to duly reflect PG&E Corp’s progress in this initiative.

On the flip side, to comply with the new gas-storage regulations, the company will need to invest more capital in its system. This, in turn, may get reflected in increased expenditure for the company’s second-quarter results and beyond.

Lately, PG&E Corp has been engaged in investing heftily to modernize and upgrade its electric system. As a result, in the first quarter, more than 50 million customer outage minutes could be avoided. Going ahead, its customers are expected to enjoy even greater reliability benefits, as PG&E Corp. continues to install this upgraded technology. Such initiatives may add customers to the company’s portfolio in the second quarter and beyond.

The company has hiked its quarterly common stock dividend by 4 cents to 53 cents per share, beginning with the to-be-reported quarter. On an annual basis, this has led to a dividend increase of 8%, from $1.96 to $2.12 per share. It indicates a stable financial position for the company, which, in turn, allows it to pay regular dividends. The decision can also be considered as a step toward achieving its target of attaining a payout ratio of 55–65% and about 60% by 2019.

For the second quarter, the Zacks Consensus Estimate for earnings stands at 79 cents, reflecting a 19.70% year-over-year improvement. Moreover, the Zacks Consensus Estimate for revenues is pegged at $4.33 billion, reflecting a 3.96% year-over-year increase.

Other Stocks that Warrant a Look

Here are a few stocks in the Utility space worth considering on the basis of our model which shows that they have the right combination to pull off a beat.

The AES Corp. (AES - Free Report) has an earnings ESP of +20.00% and a Zacks Rank #2. It is expected to report second-quarter 2017 earnings on Aug 8.

PPL Corp. (PPL - Free Report) has an earnings ESP of +2.08% and a Zacks Rank #2. It is expected to report second-quarter 2017 earnings on Aug 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Pattern Energy Group Inc. is expected to report second-quarter 2017 earnings on Aug 4. It has an earnings ESP of +23.08% and a Zacks Rank #2.

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