As of Aug 2, 79.3% of the S&P 500 index’ market cap has come up with quarterly results. Out of this, 74% came up with an earnings beat, while 68% surpassed revenue estimates. Overall, earnings are now expected to record a 9.7% increase on 5.4% higher revenues, with 13 of the 16 Zacks sectors expecting positive earnings growth. The picture should become clearer by the end of this week, as a number of the index members are scheduled to come up with results.
As far as the Utility sector is concerned, 58.6% of the stocks in this space have reported their quarterly results as of Aug 2. Of them, 64.7% came up with an earnings beat, while 58.8% exceeded revenue estimates. For Q2 as a whole, sector earnings are likely to improve 1.7% on 7.2% higher revenues. For more details on quarterly releases, you can go through our Earnings Outlook.
Notably, companies in this space, characterized by their defensive nature and domestic orientation, need huge capital to set up generation facilities, and transmission and distribution infrastructure. They also require considerable funds to maintain and upgrade the existing systems in order to meet emission-control standards. Utilities have been benefiting from the rock-bottom interest rate environment. However, the Federal Reserve has raised the rates twice in 2017 – in March and June. This is likely to hurt the utilities.
On a brighter note, the U.S. coal-based utilities got a respite with President Trump’s decision to repeal the Climate Power Plan. Moreover, Trump has walked out of the Paris Climate Agreement, which has further boosted growth prospects for these utilities as opposed to those that are engaged in expanding their renewable resources.
Let’s take a look at four utilities – Sempra Energy (SRE - Free Report) , Ameren Corp. (AEE - Free Report) , Vistra Energy Corp. (VST - Free Report) and Brookfield Renewable Partners L.P. (BEP - Free Report) – which are scheduled to release quarterly results before the opening bell on Aug 4.
Sempra Energy reported a positive earnings surprise of 9.43% in the last quarter. Moreover, the company outperformed the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 0.16%.
Our proven model shows that Sempra Energy is likely to beat estimates this season because it has the right combination of two key ingredients. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to be able to beat estimates, and Sempra Energy has the right mix.
Sempra Energy has an Earnings ESP of +11.25%. That is because the Most Accurate estimate is pegged at 89 cents, higher than the Zacks Consensus Estimate of 80 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The company currently carries a Zacks Rank #2, which, when combined with a positive ESP, makes us reasonably confident of an earnings beat this quarter.
Meanwhile, we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions (read more: Sempra Energy to Report Q2 Earnings: A Beat in Store?).
Ameren Corp’s earnings came in line with the Zacks Consensus Estimate in the prior quarter. However, it surpassed the Zacks Consensus Estimate in three of the last four quarters, with an average positive earnings surprise of 2.98%.
The Earnings ESP for Ameren is +4.35%, because the Most Accurate estimate stands at 72 cents, while the Zacks Consensus Estimate is pegged lower at 69 cents. The company carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Our proven model shows that Ameren Corp is likely to beat estimates this season because it has the right combination of two key ingredients (read more: Is a Beat in the Cards for Ameren in Q2 Earnings?).
Vistra Energy reported a positive earnings surprise of 1,700.00% in the last quarter. Moreover, it has surpassed the Zacks Consensus Estimate in one of the last four quarters, with an average positive earnings surprise of 1,700.00%.
The Earnings ESP for Vistra Energy is -150.00%, because the Most Accurate estimate stands at a loss of 2 cents, while the Zacks Consensus Estimate is pegged higher at earnings of 4 cents. The company carries a Zacks Rank #3.
Therefore, Vistra Energy is unlikely to beat earnings as it does not have the right combination of the two key ingredients.
Brookfield Renewable Partners reported a positive earnings surprise of 150.00% in the last quarter. However, it missed the Zacks Consensus Estimate in one of the last four quarters, with an average negative earnings surprise of 5.21%.
The Earnings ESP for Brookfield Renewable Partners is +75%, because the Most Accurate estimate stands at 14 cents, while the Zacks Consensus Estimate is pegged lower at 8 cents. The company carries a Zacks Rank #3.
Therefore, Brookfield Renewable Partners is likely to beat earnings as it contains the right combination of the two key ingredients.
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