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Chesapeake Utilities (CPK) Q2 Earnings: Likely to Disappoint?

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Chesapeake Utilities Corporation (CPK - Free Report) is scheduled to report second-quarter 2017 results before the opening bell on Aug 3. Last quarter, the company reported a negative surprise of 19.86%.

Let’s see how things are shaping prior to this quarter.

Factors to Consider

Chesapeake Utilitiesexpects to incur approximately $241 millions in organic capital expenditure for 2017. Heavy expansion expenses in this front are likely to have a material impact in the to-be-reported quarter as well.

In first-quarter 2017, the company’s Xeron subsidiary, engaged in propane and crude oil trading, began winding down operations. This is likely to be partially reflected in the company’s gross margin number, in the second quarter. However, we can expect a decline in pre-tax losses and severance costs arising out of this business previously.

To support and continue the company’s growth objectives, management has expanded resources around Eastern Shore, with additional expansion expenses in its transmission system. Such expansion along with continued growth in Aspire Energy, PESCO and Eight Flags businesses, would require additional staff and corporate resources. This in turn is likely to get reflected in the company’s increased operations and maintenance (O&M) expenses in the to-be-reported quarter.

Additionally, margins per retail gallon have rebounded to normal levels recently, driven by higher propane prices and better market conditions. We expect this stability to continue in the second quarter also and get duly reflected in the upcoming results.

However, stiff competition with other propane suppliers along with fluctuations in the availability and price of alternative energy sources may hurt the company’s margins in the upcoming quarterly results.

Chesapeake Utilities Corporation Price, Consensus and EPS Surprise


Earnings Whispers

Our proven model does not conclusively show that Chesapeake Utilities 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. But that is not the case here, as you will see below.

Zacks ESP: The company’s Earnings ESP is 0.00%, because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 55 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Chesapeake Utilities carries a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are a few players in the Utility sector that have the right combination of elements to post an earnings beat this quarter.

Atmos Energy Corporation (ATO - Free Report) has an earnings ESP of +4.55% and a Zacks Rank #2. It is expected to report second-quarter earnings on Aug 2.

Sempra Energy (SRE - Free Report) has an earnings ESP of +11.25% and a Zacks Rank #2. It is expected to report second-quarter earnings on Aug 4.

NewJersey Resources Corporation (NJR - Free Report) has an earnings ESP of +700.00% and a Zacks Rank #2. It is expected to report second-quarter earnings on Aug 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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