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Utility Stocks' Earnings to Watch on Aug 2: ATO & More
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So far, a handful of the S&P 500 members from the Zacks Utilities sector have released their second-quarter earnings. Another cohort of major utility stocks, including Atmos Energy (ATO - Free Report) , Exelon (EXC - Free Report) , NiSource (NI - Free Report) and Entergy Corp. (ETR - Free Report) , is set to announce earnings on Aug 2.
Factors to Consider
Domestic-focused utility companies are focused on cost management and implementation of energy-efficiency programs. Favorable rate revision and customer additions have been 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. Domestic-focused operations also insulate utilities against the adverse impact of currency fluctuation. These factors are projected to contribute to this sector’s second-quarter results.
Utilities have been aggressively adding more renewable and clean energy sources to their production portfolios, and cutting down the use of coal and other polluting sources in their generation portfolios.
Many utilities have already pledged to provide 100% electricity from clean sources in the next few decades. We expect the second-quarter results from utility companies to reflect such clean energy developments. Utilities have also been focused on improving productivity and cost structures through investments in digital technologies, integrating key systems and analyzing data to make proper decisions to improve overall operations. They continue to invest smart capital that helps reduce operating and maintenance expenses and fuel costs. This, in turn, helps customers save money on utility bills. This is likely to get reflected in the customer growth rate for these utility providers in their second-quarter results.
However, the fact that utilities need massive funds to upgrade, maintain and expand their infrastructure and operations, has made their operations difficult in the current interest rate scenario. Thus, the capital-intensive utilities are likely to have experienced higher borrowing costs, thanks to the rise in interest rates from near-zero levels, which in turn might have hurt their bottom-line performance. Also, fluctuating weather conditions across major parts of the United States are likely to have unfavorably impacted the utilities’ performance in the April-June quarter.
Q2 Expectations
Total second-quarter earnings and revenues of Utility stocks are expected to decline 5.7% and 0.7%, respectively, on a year-over-year basis.
For more details on quarterly releases, you can go through our latest Earnings Preview.
Utilities' Earnings in Focus
Let's take a look at the following utility companies that are scheduled to post their quarterly report on Aug 2 and find out how things might have shaped up prior to the announcements.
Atmos Energy delivered a four-quarter average earnings surprise of 4.92%. Strong customer growth and contribution from the organic assets are expected to have benefited its fiscal third-quarter performance.
The new rates approved in the first nine months of fiscal 2023 increased the company’s operating income, which might have had a positive impact on its quarterly earnings (read more: Atmos Energy to Report Q3 Earnings: What's in Store?).
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.
Exelon delivered a four-quarter average earnings surprise of 1.47%. New distribution rates were implemented during the second quarter in service territories of Delmarva Power & Light Company, Commonwealth Edison Company and PECO Energy Company. This is likely to have had favorably contributed to EXC’s second-quarter revenue growth.
The company’s earnings are expected to have benefited from energy efficiency programs and cost-saving initiatives.
NiSource delivered a four-quarter average earnings surprise of 0.51%. Its regulated assets, efficient capital investment recovery mechanism and strong balance sheet are likely to have boosted margins in the soon-to-be-reported quarter.
The company’s earnings are likely to have benefited from new electric and gas rates that came into effect in the first half of this year.
Entergy delivered a four-quarter average earnings surprise of 7.53%. In the second quarter, territories served by Entergy mostly witnessed warmer-than-normal weather pattern. This is likely to have boosted its revenue growth in the to-be-reported quarter.
The company’s second-quarter earnings are likely to have been impacted by higher operation and maintenance expense to restore and repair the damages caused by hail storms and wildfire in its service area during the same quarter.
Image: Shutterstock
Utility Stocks' Earnings to Watch on Aug 2: ATO & More
So far, a handful of the S&P 500 members from the Zacks Utilities sector have released their second-quarter earnings. Another cohort of major utility stocks, including Atmos Energy (ATO - Free Report) , Exelon (EXC - Free Report) , NiSource (NI - Free Report) and Entergy Corp. (ETR - Free Report) , is set to announce earnings on Aug 2.
Factors to Consider
Domestic-focused utility companies are focused on cost management and implementation of energy-efficiency programs. Favorable rate revision and customer additions have been 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. Domestic-focused operations also insulate utilities against the adverse impact of currency fluctuation. These factors are projected to contribute to this sector’s second-quarter results.
Utilities have been aggressively adding more renewable and clean energy sources to their production portfolios, and cutting down the use of coal and other polluting sources in their generation portfolios.
Many utilities have already pledged to provide 100% electricity from clean sources in the next few decades. We expect the second-quarter results from utility companies to reflect such clean energy developments.
Utilities have also been focused on improving productivity and cost structures through investments in digital technologies, integrating key systems and analyzing data to make proper decisions to improve overall operations. They continue to invest smart capital that helps reduce operating and maintenance expenses and fuel costs. This, in turn, helps customers save money on utility bills. This is likely to get reflected in the customer growth rate for these utility providers in their second-quarter results.
However, the fact that utilities need massive funds to upgrade, maintain and expand their infrastructure and operations, has made their operations difficult in the current interest rate scenario. Thus, the capital-intensive utilities are likely to have experienced higher borrowing costs, thanks to the rise in interest rates from near-zero levels, which in turn might have hurt their bottom-line performance. Also, fluctuating weather conditions across major parts of the United States are likely to have unfavorably impacted the utilities’ performance in the April-June quarter.
Q2 Expectations
Total second-quarter earnings and revenues of Utility stocks are expected to decline 5.7% and 0.7%, respectively, on a year-over-year basis.
For more details on quarterly releases, you can go through our latest Earnings Preview.
Utilities' Earnings in Focus
Let's take a look at the following utility companies that are scheduled to post their quarterly report on Aug 2 and find out how things might have shaped up prior to the announcements.
Atmos Energy delivered a four-quarter average earnings surprise of 4.92%. Strong customer growth and contribution from the organic assets are expected to have benefited its fiscal third-quarter performance.
The new rates approved in the first nine months of fiscal 2023 increased the company’s operating income, which might have had a positive impact on its quarterly earnings (read more: Atmos Energy to Report Q3 Earnings: What's in Store?).
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.
Atmos Energy has an Earnings ESP of +6.88% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Atmos Energy Corporation Price and EPS Surprise
Atmos Energy Corporation price-eps-surprise | Atmos Energy Corporation Quote
Exelon delivered a four-quarter average earnings surprise of 1.47%. New distribution rates were implemented during the second quarter in service territories of Delmarva Power & Light Company, Commonwealth Edison Company and PECO Energy Company. This is likely to have had favorably contributed to EXC’s second-quarter revenue growth.
The company’s earnings are expected to have benefited from energy efficiency programs and cost-saving initiatives.
Exelon currently has an Earnings ESP of -0.37% and a Zacks Rank #3 (read more: Exelon to Report Q2 Earnings: Here's What to Expect).
Exelon Corporation Price and EPS Surprise
Exelon Corporation price-eps-surprise | Exelon Corporation Quote
NiSource delivered a four-quarter average earnings surprise of 0.51%. Its regulated assets, efficient capital investment recovery mechanism and strong balance sheet are likely to have boosted margins in the soon-to-be-reported quarter.
The company’s earnings are likely to have benefited from new electric and gas rates that came into effect in the first half of this year.
NiSource currently has an Earnings ESP of 0.00% and a Zacks Rank #2 (read more: NiSource to Report Q2 Earnings: What's in the Cards?).
NiSource, Inc Price and EPS Surprise
NiSource, Inc price-eps-surprise | NiSource, Inc Quote
Entergy delivered a four-quarter average earnings surprise of 7.53%. In the second quarter, territories served by Entergy mostly witnessed warmer-than-normal weather pattern. This is likely to have boosted its revenue growth in the to-be-reported quarter.
The company’s second-quarter earnings are likely to have been impacted by higher operation and maintenance expense to restore and repair the damages caused by hail storms and wildfire in its service area during the same quarter.
Entergy currently has an Earnings ESP of -0.18% and a Zacks Rank #2 (read more: Entergy to Report Q2 Earnings: What's in the Offing?).
Entergy Corporation Price and EPS Surprise
Entergy Corporation price-eps-surprise | Entergy Corporation Quote
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.