Utilities sector started the Q2 reporting cycle on a mixed note, with FirstEnergy Corp. (FE - Free Report) beating on earnings but lagging revenue estimates. Nevertheless, it is imperative to mention that the domestic-focused matured Utility sector stands out among the 16 Zacks sectors as being the only sector with earnings growth expectation.
Notably, total Q2 earnings of Utility stocks are expected to increase 0.4% year over year despite 3% lower revenues. For more details on quarterly releases, you can go through our latest Earnings Outlook.
Factors Likely to Influence Q2 Results
Regulated, domestic-focused utility companies are expected to have registered a decrease in demand during the second quarter, primarily due to reduced commercial and industrial activities. However, demand from the residential group may have increased due to stay-at-home directives. For instance, per a report by Reuters, on a daily basis, the U.S. Energy Information Administration (EIA) said that business closures due to the pandemic caused weekday power demand in March and April to drop by 9-13% in the U.S. central region.
Such decline in demand must have hurt the sector’s revenue generation capacity to a certain extent in the second quarter. Moreover, the majority of the utilities’ decision to temporarily suspend service disconnections in the event of non-payment of dues should get reflected in second-quarter results.
On a brighter note, the novel coronavirus outbreak and resultant economic crisis forced the Federal Reserve to lower its interest rate to near-zero level earlier, which prevailed through the second quarter. This created an opportunity for utilities to refinance their existing debt and get new debts for their capital projects at a much cheaper rate.Moreover, the cost- cutting initiatives that the utilities have adopted lately are expected to have shaped up the sector’s earnings in the ongoing reporting cycle.
Utilities Earnings in Focus
Let's take a look at some Utility stocks that are scheduled to report earnings on Jul 31
Dominion Energy Inc.’s (D - Free Report) four-quarter average earnings surprise is 1.30%. The company’s second-quarter results are expected to reflect signs of growth owing to increased residential demand. However, higher share count and lower sales from commercial and industrial customers may have an adverse impact on its performance.
Our proven model doesn’t conclusively predict an earnings beat for Dominion this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The company has an Earnings ESP of -4.47% and carries a Zacks Rank #5 (Strong Sell). (Read more: Dominion to Report Q2 Earnings: What's in the Offing?)
You can see the complete list of today’s Zacks #1 Rank stocks here.
Eversource Energy’s (ES - Free Report) four-quarter average earnings surprise is 0.77%. The company’ssecond-quarter earnings are expected to have benefited from regulatory commission-approved distribution revenue decoupling mechanisms.
The company has an Earnings ESP of -1.58% and carries a Zacks Rank #3 (read more: Eversource to Report Q2 Earnings: What's in the Cards?).
Public Service Enterprise Group Inc.’s (PEG - Free Report) average four-quarter negative earnings surprise is 0.02%. The company’s service territory areas experienced a wide range of temperature during the second quarter, which in turn may have affected its performance.
Nevertheless, higher transmission and residential margins are likely to have boosted its quarterly earnings performance.
The company has an Earnings ESP of 0.00% and carries a Zacks Rank #3 (read more: What Awaits Public Service Enterprise in Q2 Earnings? ).
Portland General Electric Company (POR - Free Report) delivered earnings surprise of 1.11% in the last reported quarter. The company’s four-quarter average negative earnings surprise is 10.15%.
The company has an Earnings ESP of 0.00% and carries a Zacks Rank #2.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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