The Q3 earnings season is in the last leg, with as many as 445 of the S&P 500 Index members having released results so far. Reported earnings were up 4% year over year on 2.7% higher revenues.
Overall, for the S&P 500 members, projections are of a 3.3% improvement in earnings on 1.5% higher revenues despite an expected 63% plunge in earnings on 12.8% revenue deterioration in the energy space.
Four out of the 16 sectors in the Zacks coverage universe are expected to witness an earnings decline this season. Despite the lower-than-expected performance at these four sectors, this is the first quarter to record positive earnings growth after five quarters of back-to-back declines. Read more details in our weekly Earnings Preview report.
Let us now focus on the utility sector, which is characterized by its defensive nature and domestic orientation.
This sector is known for its capital-intensive nature. This is because these companies need huge capital for setting up generation facilities, and transmission and distribution infrastructure. They also require considerable funds for upgrading the existing systems to meet emission control standards.
Because of their capital-intensive nature, utilities have been benefiting from the rock-bottom interest rate environment. However, talks hinting at a rate hike before the end of the year could hamper the growth momentum of the sector. Nevertheless, we expect above-average weather in the U.S. during the third quarter to boost sales to a large extent.
In the third quarter of 2016, utility earnings (S&P 500) have been up 16.3% on 5.3% higher revenues. Keeping in mind the solid performance for the utility sector, let’s take a look at a few utilities that are scheduled to report earnings on Nov 14.
TerraForm Power, Inc. (TERP - Free Report) owns and operates solar and wind generation assets, serving utility, commercial, and residential customers. The company currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
TerraForm Power’s Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 0.00% as both the estimates are currently pegged at 32 cents. Our proven model shows that stocks with the combination of a Zacks Rank #1, #2 (Buy) or #3 and a positive ESP have increased chances of beating estimates.
Atlantica Yield plc , another Zacks Rank #3 stock, owns a portfolio of contracted renewable energy, power generation, electric transmission, and water assets. The company has reported a negative earnings surprise of 91.18% last quarter.
Atlantica Yield’s Earnings ESP is 32.76% as the Most Accurate estimate stands at 77 cents, while the Zacks Consensus Estimate is pegged at 58 cents.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Global Water Resources, Inc. (GWRS - Free Report) , again carrying a Zacks Rank #3, owns and operates regulated water, wastewater and recycled water utilities primarily in metropolitan Phoenix, AZ. The company reported a negative earnings surprise of 150.00% in the last reported quarter.
Global Water Resource has an Earnings ESP of 0.00% both as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 4 cents.
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