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4 Utility Stocks Set to Outshine Earnings Estimates in Q3

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The mature Zacks Utility sector is expected to report 4.1% year-over-year earnings growth in third-quarter 2019, riding on 4.1% revenue growth. For more details, refer to our latest Earnings Preview.

New rates in service territories, customer growth, and effective management and control of expenses are likely to have had a positive impact on utilities’ earnings. During the quarter, mature utilities gained from the launch of new technologies to maintain transmission and distribution lines, and gradual introduction of smart meters in their service territories for improving the resilience of services.

Interest rate hikes are a concern for capital-intensive utility stocks. On a positive note, the Fed lowered interest rates in July and September 2019. The interest rate cuts were a welcome change for the utilities that are likely to have positively impacted margins.

Global economic conditions in the third quarter were gloomy due to the ongoing U.S.-China trade dispute, uncertainties relating to Brexit, fluctuating oil prices, and lower-than-expected GDP growth rate of China and India. Amid market uncertainty, investing in domestic-focused utility stocks can be a safe option for investors.

Picking Up Winners From the Utility Space
        
Choosing the right stock for one’s portfolio from too many participants is certainly a tough job. An easy way to streamline the list is by selecting stocks with a positive Earnings ESP and  Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), a combination that makes us confident of a positive surprise.

Per our proprietary methodology, Earnings ESP is a determining factor for zeroing in on stocks with the maximum chance of beating on earnings. It shows the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate. Please check our Earnings ESP Filter that enables you to come across stocks having the potential to outshine earnings estimates this reporting cycle.

Our research shows that stocks with the perfect combination of the two key ingredients have 70% chances of coming up with a positive earnings surprise.

For investors seeking to apply this proven model to their portfolio, we have highlighted four Utility stocks that are likely to beat on earnings in the third quarter.

Our Utility Picks

American Electric Power Company (AEP - Free Report) has an Earnings ESP of +2.68% and a Zacks Rank #2. The company’s earnings topped estimates in three out of the last four quarters, with the average positive surprise being 2.96%. It is slated to release quarterly earnings on Oct 24, before market open. You can the complete list of today’s Zacks #1 Rank stocks here.

American Electric Power Company, Inc. Price and EPS Surprise

American Electric Power Company, Inc. Price and EPS Surprise

American Electric Power Company, Inc. price-eps-surprise | American Electric Power Company, Inc. Quote


The Southern Company (SO - Free Report) has an Earnings ESP of +0.60% and a Zacks Rank #2. The company’s earnings topped estimates in three out of the last four quarters, with the average positive surprise being 5.46%. It is slated to release quarterly results on Oct 30, before market open.

Southern Company (The) Price and EPS Surprise

Southern Company (The) Price and EPS Surprise

Southern Company (The) price-eps-surprise | Southern Company (The) Quote


Entergy Corporation (ETR - Free Report) has an Earnings ESP of +2.04% and a Zacks Rank #3. The company’s earnings topped estimates in two out of the last four quarters, with the average positive surprise being 10.82%. It is slated to release quarterly earnings on Oct 30, before market open.

Entergy Corporation Price and EPS Surprise

Entergy Corporation Price and EPS Surprise

Entergy Corporation price-eps-surprise | Entergy Corporation Quote


Consolidated Edison (ED - Free Report) has an Earnings ESP of +1.08% and a Zacks Rank #3. The company’s earnings topped estimates in three out of the last four quarters, with the average being 1.41%. It is slated to release quarterly results on Nov 7.

Consolidated Edison Inc Price and EPS Surprise

Consolidated Edison Inc Price and EPS Surprise

Consolidated Edison Inc price-eps-surprise | Consolidated Edison Inc Quote


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