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EXC Vs. XEL: Which Stock is Poised for Better Q4 Earnings?
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The fourth-quarter earnings season has crossed the half way mark. So far, the results reflect a favorable trend, with an above-average proportion of companies beating top- and bottom-line expectations.
Total earnings for the 251 S&P members that have released results as of Feb 2, improved 16% year over year on 10.5% higher revenues. The beat ratio for the bottom line was 80.5%, while that for the top line was 78.1%.
Notably, we expect total Q4 earnings to rise 13% from the year-ago period on 7.7% higher revenues. At present, 14 out of the 16 sectors in the Zacks coverage universe are expected to witness an improvement in earnings.
Amid this backdrop, let us focus on Zacks Utilities sector this earnings season. Earnings from the utility space are expected to improve 5.5% in the fourth quarter. Read more details in our weekly Earnings Preview.
A Quick Glance at the Utility Sector
Utility business is known for stability and visibility of earnings and cash flow, with the primary growth driver being consistent demand for electricity and utility services. The U.S. Energy Information Administration (“EIA”) predicted that annual average U.S. residential electricity price will increase 2.6% in 2018.
Therefore, staying invested in fundamentally strong and domestic-focused utility stocks assure investors a steady performance and regular dividends.
However, utility stocks remain subject to heavy regulation, both at the federal and state levels. Moreover, being capital intensive in nature, higher interest rate environments tend to deter growth of these stocks. Notably, in 2017 Federal Reserve increased interest rates thrice, in March, June and December. This is likely to have a negative impact on the sector.
Nevertheless, to maintain their performance level, utilities are resorting to cost-savings initiatives, modernizing transmission and distribution lines, upgrading infrastructure and focusing on renewable energy to generate electricity with lower emission. Further, new electric rates and customer growth will help the sector to witness growth in earnings in the fourth quarter.
Projections for the Zacks Utilities sector (one of the 16 Zacks sector), hint at an impressive quarter, when compared to its Q3 performance.
The sector’s earnings are likely to improve 5.5% on 1.3% higher revenues. In the third quarter, earnings for this sector declined 3.6% on 2.1% sales slump.
EXC or XEL: Which One is Poised for Better Q4 Earnings?
This is going to be another busy week with 482 companies expected to release earnings including 92 members of the S&P 500. Let’s take a look at the Utility stocks, Exelon and Xcel Energy that are scheduled to announce their Q4 results on Feb 7.
Exelon Corporation (EXC - Free Report) reported a negative earnings surprise of 1.16% in the last quarter. The company outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 1.76%.
We believe that the rate hikes at Atlanta City Electric effective September 2017 will have a positive impact on Exelon’s performance. Also, the company is expected to benefit from its cost-management initiatives.
The Zacks Consensus Estimate for the company’s fourth-quarter revenues is pegged at $7.60 billion, reflecting a year-over-year decline of 3.6%. The same for quarterly earnings is pegged at 62 cents per share, which represents 40.9% annual improvement.
Per our proven model, a stock is likely to beat earnings estimates if it has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Exelon currently constitutes that right combination.
Note that 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.
Xcel Energy Inc. (XEL - Free Report) reported a negative earnings surprise of 5.43% in the prior quarter. The company outperformed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 1.59%.
The company continues to focus on controlling Operating and Maintenance (O&M) expenses. In the first nine months of 2017, operating expenses of $58 million was lower than the year-ago period. The company expects O&M expenses to remain flat in 2017 owing to these savings.
The Zacks Consensus Estimate for the company’s fourth-quarter revenues is pegged at $2.94 billion, reflecting year-over-year growth of 5.2%. The same for the quarterly earnings is pegged at 43 cents per share, which represents 4.4% annual decline.
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EXC Vs. XEL: Which Stock is Poised for Better Q4 Earnings?
The fourth-quarter earnings season has crossed the half way mark. So far, the results reflect a favorable trend, with an above-average proportion of companies beating top- and bottom-line expectations.
Total earnings for the 251 S&P members that have released results as of Feb 2, improved 16% year over year on 10.5% higher revenues. The beat ratio for the bottom line was 80.5%, while that for the top line was 78.1%.
Notably, we expect total Q4 earnings to rise 13% from the year-ago period on 7.7% higher revenues. At present, 14 out of the 16 sectors in the Zacks coverage universe are expected to witness an improvement in earnings.
Amid this backdrop, let us focus on Zacks Utilities sector this earnings season. Earnings from the utility space are expected to improve 5.5% in the fourth quarter. Read more details in our weekly Earnings Preview.
A Quick Glance at the Utility Sector
Utility business is known for stability and visibility of earnings and cash flow, with the primary growth driver being consistent demand for electricity and utility services. The U.S. Energy Information Administration (“EIA”) predicted that annual average U.S. residential electricity price will increase 2.6% in 2018.
Therefore, staying invested in fundamentally strong and domestic-focused utility stocks assure investors a steady performance and regular dividends.
However, utility stocks remain subject to heavy regulation, both at the federal and state levels. Moreover, being capital intensive in nature, higher interest rate environments tend to deter growth of these stocks. Notably, in 2017 Federal Reserve increased interest rates thrice, in March, June and December. This is likely to have a negative impact on the sector.
Nevertheless, to maintain their performance level, utilities are resorting to cost-savings initiatives, modernizing transmission and distribution lines, upgrading infrastructure and focusing on renewable energy to generate electricity with lower emission. Further, new electric rates and customer growth will help the sector to witness growth in earnings in the fourth quarter.
Projections for the Zacks Utilities sector (one of the 16 Zacks sector), hint at an impressive quarter, when compared to its Q3 performance.
The sector’s earnings are likely to improve 5.5% on 1.3% higher revenues. In the third quarter, earnings for this sector declined 3.6% on 2.1% sales slump.
EXC or XEL: Which One is Poised for Better Q4 Earnings?
This is going to be another busy week with 482 companies expected to release earnings including 92 members of the S&P 500. Let’s take a look at the Utility stocks, Exelon and Xcel Energy that are scheduled to announce their Q4 results on Feb 7.
Exelon Corporation (EXC - Free Report) reported a negative earnings surprise of 1.16% in the last quarter. The company outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 1.76%.
We believe that the rate hikes at Atlanta City Electric effective September 2017 will have a positive impact on Exelon’s performance. Also, the company is expected to benefit from its cost-management initiatives.
The Zacks Consensus Estimate for the company’s fourth-quarter revenues is pegged at $7.60 billion, reflecting a year-over-year decline of 3.6%. The same for quarterly earnings is pegged at 62 cents per share, which represents 40.9% annual improvement.
Per our proven model, a stock is likely to beat earnings estimates if it has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Exelon currently constitutes that right combination.
The Zacks Rank #3 company has an Earnings ESP of +0.88%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. (Read More: Will Rate Hikes Help Exelon Beat on Earnings in Q4?).
Note that 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.
Exelon Corporation Price and EPS Surprise
Exelon Corporation Price and EPS Surprise | Exelon Corporation Quote
Xcel Energy Inc. (XEL - Free Report) reported a negative earnings surprise of 5.43% in the prior quarter. The company outperformed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 1.59%.
The company continues to focus on controlling Operating and Maintenance (O&M) expenses. In the first nine months of 2017, operating expenses of $58 million was lower than the year-ago period. The company expects O&M expenses to remain flat in 2017 owing to these savings.
The Zacks Consensus Estimate for the company’s fourth-quarter revenues is pegged at $2.94 billion, reflecting year-over-year growth of 5.2%. The same for the quarterly earnings is pegged at 43 cents per share, which represents 4.4% annual decline.
Xcel Energy is unlikely to beat on earnings this quarter as the Zacks Rank #3 company has an Earnings ESP of -1.43%. You can see the complete list of today’s Zacks #1 Rank stocks here. (Read More: What's in Store for Xcel Energy This Earnings Season?)
Xcel Energy Inc. Price and EPS Surprise
Xcel Energy Inc. Price and EPS Surprise | Xcel Energy Inc. Quote
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>