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Public Service Enterprise (PEG) Q2 Earnings: What's in Store?

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Public Service Enterprise Group Inc. (PEG - Free Report) is scheduled to report second-quarter 2018 results on Aug 1, before the opening bell.

In the last reported quarter, the utility’s earnings missed the Zacks Consensus Estimate by 1.02%. However, it exceeded the same in two of the trailing four quarters, with an average beat of 1.79%.

Let’s see how things are shaping up for this announcement.

Factors at Play

In April 2018, Public Service Enterprise’s service territories witnessed a snowstorm followed by heavy rains and strong winds, while warmer-than-normal temperature prevailed in May and June. As a result, the company’s service territories experienced either adverse or above-average-temperature for majority of the second quarter, resulting in increased electricity demand. This, in turn, should boost the company’s top line in the soon-to-be-reported quarter.    

In line with this, the Zacks Consensus Estimate for Public Service Enterprise’s second-quarter revenues of $2.37 billion reflects year-over-year growth of 11.1%.

In the first quarter of 2018, the company’s bottom line was driven by successful execution of its infrastructure investment programs, in particular, the recovery of investments made under the Gas System Modernization Program. We may expect similar investment recoveries to boost Public Service Enterprise’s earnings growth is second quarter as well.

However, severe storms that struck Public Service Enterprise’s service territories at the onset of the second quarter might have caused power outages. Consequently, the company’s operation and maintenance costs are expected to shoot up. This, in turn, may weigh on its bottom-line performance thereby neutralizing the benefits of anticipated top-line growth and the aforementioned investment programs.

The Zacks Consensus Estimate for the company’s second-quarter earnings of 62 cents per share reflects no change from year-ago quarter’s reported figure.

Earnings Whispers

Our proven model does not conclusively show that Public Service Enterprise is likely to beat earnings in the second quarter. This 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 elaborated below:

Earnings ESP: Public Service Enterprise has an Earnings ESP of -0.40%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company carries a Zacks Rank #3, which increases the possibility of an earnings beat. However, its negative ESP makes surprise prediction difficult.

Conversely, 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.

Other Stocks That Warrant a Look

Here are a few operators in the Utility sector that you may consider as our model shows that they have the right combination of elements to deliver an earnings beat in the second quarter:

Ameren Corp. (AEE - Free Report) has an Earnings ESP of +1.69% and a Zacks Rank #2. The company is scheduled to report second-quarter results on Aug 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

CenterPoint Energy (CNP - Free Report) has an Earnings ESP of +0.93% and a Zacks Rank of 2. The company is scheduled to report second-quarter results on Aug 3.

AES Corp. (AES - Free Report) has an Earnings ESP of +3.01% and a Zacks Rank #3. The company is scheduled to report second-quarter results on Aug 7.

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