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FE vs. AGR: Which Stock is Poised for Better Q1 Earnings?

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We are currently at the nascent stage of the first-quarter 2018 earnings season, which is already showing signs of being another positive quarter. As of Apr 19, 73 S&P 500 members have reported results, and earnings of the reported companies were up 25.8% from the same period last year on 10.6% higher revenues, with 82.2% beating EPS estimates and 71.2% surpassing revenue estimates.

The reported earnings no doubt indicate another strong earnings season. Per our latest Earnings Trends, overall earnings in the first quarter for all the S&P 500 members are expected to be up 17.8% on 7.6% growth in revenues. The expected earnings growth in the first quarter is going to be the highest quarterly earnings growth in the last seven years.

Let’s focus on the domestic-focused matured Utility sector. This sector, along with 14 other out of the 16 Zacks sectors, is going to come up with a positive year-over-year earnings, Currently, two sectors (Autos & Conglomerates) are likely to register earnings declines.

The Zacks Utility sector’s earnings are expected to increase 13% year over year, thanks to stable performance by most of the utilities. Utilities are expected to gain from tax reforms and cold weather conditions, driving the demand for electricity. However, the rate-sensitive capital intensive utility stocks also had to accommodate to the Fed rate hike. The Fed rate has now been raised for the sixth time (latest on Mar 2018) since the first hike was announced in December 2015, when the U.S. economy had pulled itself out of the Great Recession.

Let’s take a look at the two Utility stocks, scheduled to report first-quarter 2018 earnings on Apr 23, 2018 and see how things are shaping up for the upcoming results.

FirstEnergy Corporation (FE - Free Report) reported positive earnings surprise in the last four quarters with an average surprise of 6.04%. The company is expected to benefit from higher weather-related usage from the residential sector and improvement in demand from the industrial sector, driven by fossil fuels and steel industries. (Read more: Will FirstEnergy Stay on the Beat Track in Q1 Earnings?)

FirstEnergy Corporation Price and EPS Surprise
 

In the first quarter, FirstEnergy has an Earnings ESP of +3.35%, with a Zacks Rank #3 (Hold), which is a favorable case for a positive earnings surprise this season. A stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 to beat estimates. You can see the complete list of today’s Zacks #1 Rank stocks here.

Avangrid Inc. (AGR - Free Report) reported average positive earnings surprise in the last four quarters with an average surprise of 9.95%. This diversified utility has operation in 27 states and owns regulated utilities, generating electricity through two primary lines of business, Avangrid Networks and Avangrid Renewables.

Avangrid, Inc. Price and EPS Surprise

Avangrid, Inc. Price and EPS Surprise | Avangrid, Inc. Quote

In the first quarter, Avangrid has an Earnings ESP of +0.95%, with a Zacks Rank #4 (Sell), making an earnings surprise prediction uncertain this season.

You can uncover the best stocks to buy or sell before they’re reported with our  Earnings ESP Filter.

Price Movement
    
Year to date, FirstEnergy returned 15.2% compared with 2.1% from Avangrid, versus the industry’s decline of 2.6%.
 


 
At present, FirstEnergy looks a better choice going into the earnings season.

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