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The Q1 earnings season has already crossed the halfway mark with 267 S&P 500 members having already reported quarterly results as of Apr 27. Going by the positive trends, this quarter is likely to record strongest earnings and revenue growth in seven years. Earnings for the reported S&P 500 members are up 25.1% from the same period last year, on 10.0% higher revenues, with 76.8% beating EPS estimates and 73.8% surpassing revenues.
Per our latest Earnings Preview, combining the reported results with estimates for the yet-to-release companies, total earnings for the S&P 500 index is anticipated to be up 22.6% from the same period last year, driven by 8.4% growth in revenues.
Amid the positive earnings outlook for the first quarter, let’s delve into the domestic-focused matured Utility sector. This sector, along with another 14 of the 16 Zacks sectors, is expected to come up with a positive year-over-year earnings. Currently, only Autos sector is likely to register an earnings decline.
The Zacks Utility sector’s earnings are expected to increase 13.9% year over year on 1.4% growth in revenues, thanks to stable performance by most of the utilities. The need for heating stemming from cold weather conditions and increased demand for electricity will aid the utilities. Additionally, tax reforms also helped the utilities in lowering their tax burden substantially.
This sector, apart from investing in generating plants that produce electricity with low and negligible amounts of emissions, are also focused in improving and upgrading transmission as well as distribution networks. Utilities are also investing in power storage facilities and guiding investors to efficient usage of electricity.
The focus on expanding regulated operations and lower wholesale operation exposure is noticeable. This, in a way, gives further visibility to the utilities forward earnings and makes their operation more stable. Additionally, consistent dividend payment and share buybacks makes utilities a good investment choice for all seasons.
However, the rate-sensitive capital-intensive utility stocks also accommodating the Fed rate hike. Notably, the Fed rate has now been raised for the sixth time (latest on March 2018) since the first hike in December 2015.
How to Pick the Right Utility Stocks?
With a wide array of companies in the Utility space, picking up the right one could be daunting task. However, the Zacks methodology could offer some relief. One can narrow down the list using positive Zacks Earnings ESP as a guide, along with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for identifying stocks that have high chance of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Please check our Earnings ESP Filter that enables you to come across stocks with the potential to outshine earnings estimates this reporting cycle.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Applying this stock picking strategy, we have zeroed in on five utility stocks that are poised to beat earnings estimates in the upcoming releases.
Folsom, NJ-based South Jersey Industries, Inc., along with its subsidiaries, is engaged in the purchase, transmission, and sale of natural gas.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at 96 cents. South Jersey Industries is set to report first-quarter results on May 8, 2018.
Milwaukee, WI-based WEC Energy Group, Inc., (WEC - Free Report) , along with its subsidiaries, provides regulated natural gas and electricity, and nonregulated renewable energy services in the United States.
The company has an Earnings ESP of +0.58% and a Zacks Rank #2.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at $1.16. WEC Energy Group is set to report first-quarter results on May 1,2018.
St. Louis, MO-based Spire Inc. (SR - Free Report) along with its subsidiaries engages in the purchase, retail distribution, and sale of natural gas to residential, commercial, industrial, and other end-users of natural gas customers in the United States.
The company has an Earnings ESP of +2.99% and a Zacks Rank #2.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at $2.48. Spire is slated to report second-quarter fiscal 2018 results on May 2,2018.
Boise, IB-based IDACORP, Inc. (IDA - Free Report) along with its subsidiary, Idaho Power Company, engages in the generation, transmission, distribution, purchase, and sale of electric energy in the United States.
The company has an Earnings ESP of +3.55% and a Zacks Rank #2.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at 71 cents. IDACORP is scheduled to report first-quarter results on May 3,2018.
Honolulu, HI-based Hawaiian Electric Industries, Inc. (HE - Free Report) along with its subsidiaries engages in the electric utility and banking businesses primarily in the state of Hawaii.
The company has an Earnings ESP of +0.91% and a Zacks Rank #2.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at 37 cents. Hawaiian Electric is set to report first-quarter results on May 4,2018.
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Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
5 Utility Stocks to Snap Up This Earnings Season
The Q1 earnings season has already crossed the halfway mark with 267 S&P 500 members having already reported quarterly results as of Apr 27. Going by the positive trends, this quarter is likely to record strongest earnings and revenue growth in seven years. Earnings for the reported S&P 500 members are up 25.1% from the same period last year, on 10.0% higher revenues, with 76.8% beating EPS estimates and 73.8% surpassing revenues.
Per our latest Earnings Preview, combining the reported results with estimates for the yet-to-release companies, total earnings for the S&P 500 index is anticipated to be up 22.6% from the same period last year, driven by 8.4% growth in revenues.
Amid the positive earnings outlook for the first quarter, let’s delve into the domestic-focused matured Utility sector. This sector, along with another 14 of the 16 Zacks sectors, is expected to come up with a positive year-over-year earnings. Currently, only Autos sector is likely to register an earnings decline.
The Zacks Utility sector’s earnings are expected to increase 13.9% year over year on 1.4% growth in revenues, thanks to stable performance by most of the utilities. The need for heating stemming from cold weather conditions and increased demand for electricity will aid the utilities. Additionally, tax reforms also helped the utilities in lowering their tax burden substantially.
This sector, apart from investing in generating plants that produce electricity with low and negligible amounts of emissions, are also focused in improving and upgrading transmission as well as distribution networks. Utilities are also investing in power storage facilities and guiding investors to efficient usage of electricity.
The focus on expanding regulated operations and lower wholesale operation exposure is noticeable. This, in a way, gives further visibility to the utilities forward earnings and makes their operation more stable. Additionally, consistent dividend payment and share buybacks makes utilities a good investment choice for all seasons.
However, the rate-sensitive capital-intensive utility stocks also accommodating the Fed rate hike. Notably, the Fed rate has now been raised for the sixth time (latest on March 2018) since the first hike in December 2015.
How to Pick the Right Utility Stocks?
With a wide array of companies in the Utility space, picking up the right one could be daunting task. However, the Zacks methodology could offer some relief. One can narrow down the list using positive Zacks Earnings ESP as a guide, along with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).
Earnings ESP is our proprietary methodology for identifying stocks that have high chance of surprising with their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Please check our Earnings ESP Filter that enables you to come across stocks with the potential to outshine earnings estimates this reporting cycle.
Our research shows that for stocks with this combination, the chance of a positive earnings surprise is as high as 70%.
Applying this stock picking strategy, we have zeroed in on five utility stocks that are poised to beat earnings estimates in the upcoming releases.
Folsom, NJ-based South Jersey Industries, Inc., along with its subsidiaries, is engaged in the purchase, transmission, and sale of natural gas.
The company has an Earnings ESP of +3.47% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at 96 cents. South Jersey Industries is set to report first-quarter results on May 8, 2018.
Milwaukee, WI-based WEC Energy Group, Inc., (WEC - Free Report) , along with its subsidiaries, provides regulated natural gas and electricity, and nonregulated renewable energy services in the United States.
The company has an Earnings ESP of +0.58% and a Zacks Rank #2.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at $1.16. WEC Energy Group is set to report first-quarter results on May 1,2018.
St. Louis, MO-based Spire Inc. (SR - Free Report) along with its subsidiaries engages in the purchase, retail distribution, and sale of natural gas to residential, commercial, industrial, and other end-users of natural gas customers in the United States.
The company has an Earnings ESP of +2.99% and a Zacks Rank #2.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at $2.48. Spire is slated to report second-quarter fiscal 2018 results on May 2,2018.
Boise, IB-based IDACORP, Inc. (IDA - Free Report) along with its subsidiary, Idaho Power Company, engages in the generation, transmission, distribution, purchase, and sale of electric energy in the United States.
The company has an Earnings ESP of +3.55% and a Zacks Rank #2.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at 71 cents. IDACORP is scheduled to report first-quarter results on May 3,2018.
Honolulu, HI-based Hawaiian Electric Industries, Inc. (HE - Free Report) along with its subsidiaries engages in the electric utility and banking businesses primarily in the state of Hawaii.
The company has an Earnings ESP of +0.91% and a Zacks Rank #2.
The Zacks Consensus Estimate for the to-be-reported quarter earnings is pegged at 37 cents. Hawaiian Electric is set to report first-quarter results on May 4,2018.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>