With earnings releases coming in thick and fast, nearly 87% members of the S&P 500 index will have revealed financial numbers for the quarter by the end of this week. The utility sector, known for its inherent stability, will be in focus this week, as many companies operating in the space have lined up to declare quarterly results.
Note that a domestic orientation makes utilities immune to the impact of a strengthening dollar. However, the performance of these companies depends greatly on weather patterns. Above-average temperatures in the second quarter of 2016, therefore, aided the performance of the majority of utilities operating in the U.S. The steady drop in unemployment rates should further boost results of the sector this quarter.
So far, 317 S&P 500 members have released second-quarter results, accounting for 73.5% of the index’s total market capitalization. Total earnings for these companies have declined 3.3% due to 0.9% lower revenues. In spite of the bleak year-over-year comparisons, an impressive 72.9% managed to beat on earnings, while 53.6% surpassed top-line expectations.
As per the latest Earnings Preview report, the general outlook for the utility sector remains bullish on the back of the projections of a 20.4% year-over-year surge in quarterly earnings, compared to the S&P 500’s anticipated 3.4% drop over the same period, including the results of the energy sector. On the other hand, revenues at the utility sector will grow 5.2%, compared to the S&P 500’s 0.4% dip.
Encouraged by a bullish outlook and positive fundamentals, particularly the low-rate scenario, let’s take a look at some utilities that are scheduled to report earnings on Aug 3:
Energy producer Dominion Resources, Inc. (D - Free Report) , a Zacks Rank #3 stock, possesses one of the largest British Thermal Unit production capabilities among the integrated utilities operating in northeastern U.S. Our proven model does not conclusively show that Dominion Resources is likely to beat estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen.
The Most Accurate estimate is pegged at 70 cents while the Zacks Consensus Estimate stands at 71 cents, resulting in an Earnings ESP of -1.41% for Dominion Resources. (Read more: What's in Store for Dominion This Earnings Season?)
Xcel Energy Inc. (XEL - Free Report) is predominantly an operating public utility engaged in the generation, transmission and distribution of electricity and the transportation, storage and distribution of natural gas. The company has an Earnings ESP of -2.44% and a Zacks Rank #4 (Sell). (Read more: Xcel Energy Q2 Earnings: Stock Likely to Disappoint)
ALLETE, Inc. (ALE - Free Report) , a Zacks Rank #3 stock, is an energy company. In addition to electric utilities, ALLETE owns ALLETE Clean Energy, U.S. Water Services, BNI Energy in Center, and has an 8% equity interest in the American Transmission Co. Last quarter, the company reported a positive earnings surprise of 2.20%.
The company has an Earnings ESP of -5.88% as the Most Accurate estimate is pegged at 48 cents while the Zacks Consensus Estimate stands higher at 51 cents.
Avista Corp. (AVA - Free Report) , a Zacks Rank #2 stock, is a diversified energy company with utility and subsidiary operations located throughout North America.
The company has an Earnings ESP of +2.33% because the Most Accurate estimate stands at 44 cents while the Zacks Consensus Estimate is pegged lower at 43 cents. The utility clocked an earnings surprise of 7.23% in the prior quarter.
Black Hills Corporation (BKH - Free Report) , a Zacks Rank #3 stock, generates wholesale electricity and produces natural gas, crude oil and coal.
It has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 56 cents. Last quarter, the company delivered a positive earnings surprise of 29.47%
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