Utilities is one of the 15 sectors out of the total 16 Zacks sectors expected to report year-over-year revenue growth in the second quarter of 2022.
So far, a handful of the S&P 500 members from the Zacks Utilities sector have released their Q2 earnings. Another cohort of major utility stocks, including
Consolidated Edison ( ED Quick Quote ED - Free Report) , Duke Energy ( DUK Quick Quote DUK - Free Report) , Sempra Energy ( SRE Quick Quote SRE - Free Report) , Alliant Energy ( LNT Quick Quote LNT - Free Report) and NRG Energy ( NRG Quick Quote NRG - Free Report) , is set to announce their earnings on Aug 4. Factors Likely to Influence Q2 Utility Results
Zacks Utilities sector is expected to have benefited in the second quarter from a revival of demand in the commercial and industrial groups of customers. An improvement in economic conditions after the pandemic has been generating fresh demand for utility services.
Domestic-focused companies operating in the sector are focused on cost management and implementation of energy-efficiency programs. New rates and customer additions are creating fresh demand as well as assisting the utilities. Investment in strengthening the infrastructure has been allowing utilities to provide services even during extreme conditions, leading to stable earnings.
Utilities are gradually moving toward clean sources of fuel to produce electricity and lower emission. The stringent regulation of emissions and the high cost of conventional fuel and government incentives on the usage of clean fuel are also urging the utilities to take a decision and focus more on clean energy sources. Many utilities have already pledged to provide 100% electricity from clean sources in the next few decades.
The performance of the capital-intensive utilities is likely to have been adversely impacted by the increase in interest rates from the near-zero levels. The increase in borrowing costs and the possibility of more interest rate hikes this year will further hike capital servicing expenses and adversely impact earnings.
The updated outlook of the National Oceanic and Atmospheric Administration predicted the summer of 2022 to be drier and hotter than normal. This is expected to have led to higher demand for water and electricity for cooling purposes, benefiting the utilities.
Total Q2 earnings of Utility stocks are expected to decline 5.4% year over year, while revenues are likely to inch up 0.1%.
For more details on quarterly releases, you can go through our latest Earnings Preview. Utilities' Earnings in Focus
Let's take a look at some Utility stocks that are scheduled to report earnings on Aug 4.
Consolidated Edison: During the second quarter of 2022, the company’s service territories witnessed warmer-than-normal temperatures for most part, while flood-like conditions prevailed at the end. Such a weather pattern is likely to have had a mixed impact on overall quarterly performance.
The flood-like conditions in its service territories might have caused infrastructural damage, thus increasing the company’s operating expenses (read more:
What's in Store for Consolidated Edison in Q2 Earnings?). According to the Zacks model, 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. You can see the complete list of today’s Zacks #1 Rank stocks here. Consolidated Edison currently has an Earnings ESP of +1.15% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. Duke Energy: Customer growth, coupled with positive rate case outcomes across various regions, is anticipated to have favorably impacted Duke Energy’s second-quarter revenues. On the cost front, parts of Duke Energy’s service territories experienced some wildfire activities in the second quarter, thereby causing outages and possible damage to DUK’s infrastructure. This must have pushed up DUK’s quarterly expenses to restore power and repair its infrastructure, thereby dampening the bottom line in the second quarter. Duke Energy currently has an Earnings ESP of 0.00% and a Zacks Rank #3 (read more: Duke Energy to Post Q2 Earnings: What's in Store?). Sempra Energy: Sempra Energy’s service territories witnessed warmer-than-normal temperatures in the second quarter. This, in turn, is likely to have boosted the electricity demand for cooling purposes among the company’s customers. A positive impact of the rate revision might have contributed to the second-quarter revenue performance. Factors like increased revenues from rate updates reflecting increased invested capital, higher customer consumption and customer growth must have benefited overall second-quarter earnings. Sempra Energy currently has an Earnings ESP of 0.00% and a Zacks Rank #2 (read more: What's in the Offing for Sempra Energy in Q2 Earnings?). Alliant Energy: The ongoing economic development in Alliant Energy’s service territories and the rising demand from residential and commercial customer groups are likely to have boosted LNT’s second-quarter performance. Alliant Energy’s team is working efficiently to control inflationary cost pressure and keep it the same as year-ago quarter levels. Alliant Energy currently has an Earnings ESP of 0.00% and a Zacks Rank #3 (read more: Alliant Energy to Post Q2 Earnings: What's in Store?). NRG Energy: The company’s quarterly earnings are likely to have benefited from ongoing share repurchases, which have reduced its outstanding shares. Despite inflationary pressure, second-quarter earnings of NRG Energy are likely to have been driven by the stable performance of its diversified portfolio of assets. NRG Energy currently has an Earnings ESP of 0.00% and a Zacks Rank #3 (read more: NRG Energy to Post Q2 Earnings: What's in the Offing?).
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