The majority of big Utilities have reported their Q2 results. Impressively, the domestic-focused matured Utilities sector is one among the three of the 16 Zacks sectors expected to deliver earnings growth.
Notably, total Q2 earnings of the Utility stocks are expected to increase 5.7% year over year, while revenues are projected to fall 5.1%. For more details on quarterly releases, you can go through the 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, 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 Aug 10
Duke Energy Corp’s (DUK - Free Report) four-quarter average earnings surprise is 4.46%. The company’s second-quarter results are expected to reflect lower retail sales volume courtesy of the COVID-19 pandemic and following stay-at-home directive. A potential increase in its bad debt expense might have hurt Duke Energy’s Q2 bottom line performance.
Our proven model doesn’t conclusively predict an earnings beat for Duke Energy 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 -0.10% and carries a Zacks Rank #4 (Sell). (Read more: Duke Energy to Report Q2 Earnings: What's in Store?)
You can see the complete list of today’s Zacks #1 Rank stocks here.
PPL Corporation (PPL - Free Report) delivered an earnings surprise of 1.05% in the trailing four quarters, on average. Its second-quarter performance is expected to have been impacted by soft demand from the commercial and industrial (C&I) customers group due to coronavirus-induced lockdown. Nevertheless, PPL Corp. hedged nearly 86% of its U.K. earnings for the remainder of 2020, which is expected to positively impact the June-quarter results.
The company has an Earnings ESP of -1.79% and carries a Zacks Rank #3 (read more: PPL Corp to Report Q2 Earnings: What's in the Cards?).
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