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Utilities Q1 Earnings Roster for Apr 26: AEP, CMS, SCG & XEL

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The Q1 earnings season is set to cross its half way mark by the end of this week. So far, earnings and revenue growth rates and the proportion of positive earnings surprises are above historical levels.

Total earnings for the 87 S&P members that have released results as of Apr 20, improved 25% year over year on 10.7% higher revenues. The beat ratio for the bottom line was 82.8%, while that for the top line was 67.8%.

Notably, we expect total Q1 earnings for the index members to rise 18.3% from the year-ago period on 7.7% higher revenues. At present, 14 out of the 16 sectors in the Zacks universe are expected to witness an improvement in earnings.

Amid this backdrop, let’s see how the Zacks Utilities sector is poised for this earnings season. Earnings from the utility space are expected to improve 12.4% in the first quarter. (For more details check out our latest Earnings Preview)

A Glance at the Utility Sector

Utility business is known for stability and visibility of earnings and cash flow, with the primary growth driver being consistent demand for electricity and utility services. The U.S. Energy Information Administration (“EIA”) predicted that annual average U.S. residential electricity price will increase 2.6% in 2018. Thus the sector is expected to tread on a growth trajectory.

Therefore, staying invested in fundamentally strong and domestic-focused utility stocks will provide investors with steady returns. Currently, the sector is undergoing a transition, wherein the primary fuel source — coal — is being replaced by natural gas and renewables.

However, utility stocks are subject to stringent regulations, both at the federal and state levels. Moreover, being capital intensive in nature, higher interest rates dent the growth of these stocks. In March 2018, the Federal Reserve raised rates for the sixth time since December 2015 when the Federal Open Market Committee began increasing rates from near zero. This is likely to have a negative impact on the sector.

Nevertheless, to maintain their performance level, utilities are undertaking cost-savings initiatives, modernizing transmission and distribution lines, upgrading infrastructure and focusing on renewable energy to generate electricity. Further, new electric rates and customer growth will help the sector to witness improvement in earnings in the first quarter.

The quarter was also a witness to a colder-than-normal winter in most parts of the United States. Utilities are likely to benefit from this as it will drive heating expenditures for households, boosting the companies’ earnings.

However, earnings projections for the sector hint at an unimpressive quarter, when compared to its Q4 performance.

The sector’s earnings are likely to improve 12% on in-line year-over-year revenues. In the fourth quarter, earnings for this sector increased 13.3% on 4.2% sales growth.

Utilities to Post Q1 Earnings on Apr 26

American Electric Power Company, Inc. (AEP - Free Report) delivered a positive earnings surprise of 4.94% in the last quarter. However, the company underperformed the Zacks Consensus Estimate in the trailing four quarters, with an average miss of 2.25%.

The company’s commercial sales were drab in the fourth quarter of 2017. Expecting this trend to continue in the to-be-reported quarter as well, the Zacks Consensus Estimate for American Electric’s first-quarter revenue estimate of $3.74 billion shows an annual decline of 4.9%.

However, lower tax rates, courtesy of the latest tax reform, is expected to boost American Electric’s quarterly bottom line.

Per our proven model, a stock is likely to beat earnings estimate if it has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). American Electric does not possess this combination.

The company has an Earnings ESP of -0.05%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

American Electric currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Please note that 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: American Electric Q1 Earnings: What's in the Cards?).

 

 

In the last reported quarter CMS Energy Corp.’s (CMS - Free Report) earnings were on par with estimates. The company outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 0.61%.

Lower tax rate, courtesy of the recent tax reform, is likely to fuel the company’s bottom line. The company’s first-quarter Zacks Consensus Estimate for earnings is pegged at 80 cents, reflecting a year-over-year rise of 12.7%.

CMS Energy’s service territories witnessed colder-than-normal winters in the first quarter, which is likely to result in higher household expenditures on heating. Thus, demand for electricity is likely to remain high. Needless to say, CMS Energy’s revenues in the quarter under review is likely to increase courtesy of this.

Earnings ESP for CMS Energy is +2.08%, while it carries a Zacks Rank #2. Therefore, our model shows that the company is likely to beat earnings estimates this quarter (read more: CMS Energy to Report Q1 Earnings: A Beat in Store?).

 

CMS Energy Corporation Price and EPS Surprise

 

CMS Energy Corporation Price and EPS Surprise | CMS Energy Corporation Quote

 

SCANA Corp. delivered a positive earnings surprise of 3.06% in the last reported quarter. Moreover, the company outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 0.98%.

The company’s balance sheet is not impressive, with cash and equivalents totaling $409 million compared with debt of around $5.9 billion. The company’s decision to stall construction works of units 2 and 3 at the VC Summer Nuclear Station has had a negative impact on SCANA.

Earnings ESP for SCANA is 0.00%, while it carries a Zacks Rank #3. Therefore, our model does not show that SCANA will beat estimates this quarter (read more: SCANA to Report Q1 Earnings: What's in the Cards?).

 

SCANA Corporation Price and EPS Surprise

 

SCANA Corporation Price and EPS Surprise | SCANA Corporation Quote

 

Xcel Energy, Inc. (XEL - Free Report) reported a negative earnings surprise of 2.33% in the fourth quarter of 2017. However, the company outperformed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 0.44%.

Xcel Energy is expected to continue benefiting from ongoing improvement in the economic condition in its service territories. The upward revision in both electric and natural gas customers is expected to lead to higher demand.

For the first quarter, the Zacks Consensus Estimate for Xcel Energy’s revenues is pegged at $2,932 million, indicating a sequential increase of 4.9%. The Zacks Consensus Estimate for earnings is 51 cents, reflecting sequential growth of 21.4%.

Earnings ESP for Xcel Energy is +1.11%, while it carries a Zacks Rank #2. Therefore, our model shows that the company is likely to beat earnings estimates this quarter (read more:Xcel Energy to Report Q1 Earnings: A Beat in Store?).

 

Xcel Energy Inc. Price and EPS Surprise

 

Xcel Energy Inc. Price and EPS Surprise | Xcel Energy Inc. Quote

 

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