Domestic-focused Utility stocks’ third-quarter results have started rolling in. The trend so far points toward another positive earnings growth picture from this mature Zacks Utility Sector. As of Oct 24, 3.4% of the Utility stocks already released quarterly results, reflecting 18.7% year-over-year earnings growth. However, revenues dropped 8.1% as of the same date.
Per the latest Earnings Outlook , the overall Q3 picture of the Utility sector is a mixed one. While earnings are expected to improve 6.6%, total revenues will decline 1.4%.
Overall, the utilities will benefit from the new rates in their service territories, customer growth, effective management and control of expenses through the introduction of new technology. In addition, strengthening of transmission and distribution networks, which lowered outage time, is going to have a positive impact on earnings. Non availability of replacement of the services provided by the utilities is the biggest driving force.
However, capital-intensive utilities do have their share of weaknesses. The rising interest rates are constantly increasing the cost of capital, which will hurt margins and compromise on its ability to raise dividend rates. Federal Reserve increased interest rates in September 2018, marking the eighth hike since December 2015, with more hikes expected going forward. In addition, the utilities also need to adhere to stringent environmental regulations, and withstand challenges from hurricanes and storms.
Furthermore, unemployment rate in the United States at the end of third quarter dropped to 3.7%. This historic low level of unemployment boosted the demand for new housing units and in turn the requirement for utility services.
Per a U.S. Energy Information Administration ("EIA") report, total electricity sold in the United States during August 2018 was 376,416 million kWh, up 4.5% year over year, driven by higher consumption from residential, commercial and transportation sectors.
Now let's take a look at the following Utility stocks that are scheduled to report third-quarter 2018 earnings on Nov 1 and find out how things are shaping up prior to the announcement.
Dominion Energy (D - Free Report) delivered average positive earnings surprise of 6.33% in the last four quarters. The company will benefit from an increasing electricity demand from data center campuses and residential customers. (Read more: Can Dominion Energy Deliver a Beat Again in Q3 Earnings?)
Dominion Energy has an Earnings ESP of +2.22% and a Zacks Rank #2 (Buy), which is a favorable combination that indicates a likely positive earnings surprise this season. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 or #3 (Hold) to be able to beat estimates. You can see see the complete list of today's Zacks #1 Rank stocks here
Exelon Corporation (EXC - Free Report) delivered a positive earnings surprise of 16.39% in the last reported quarter. The company is undertaking various cost-optimization programs, which in turn will lower its operating and maintenance expenses. It is likely to benefit from cost-management initiatives through improved efficiency as well as productivity.
Exelon has an Earnings ESP of +0.57% and a Zacks Rank #2, which is a favorable combination, indicating a likely positive earnings surprise this season. (Read more: Is a Beat in Store for Exelon This Earnings Season?)
You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Eversource Energy (ES - Free Report) delivered a positive earnings surprise of 1.33% in the last reported quarter. The company’s third-quarter earnings will benefit from the acquisition of Aquarion Water Company and new rates approved in Connecticut.
Eversource Energy has an Earnings ESP of +2.55% and a Zacks Rank #2, which is a favorable combination, indicating a likely positive earnings surprise this season. (Read more: What's in Store for Eversource Energy in Q3 Earnings?)
PPL Corporation (PPL - Free Report) delivered an average positive earnings surprise of 8.55% in the last four quarters. Its third-quarter results are likely to reflect strong demand at its domestic and U.K. regulated segments.
PPL Corp has an Earnings ESP of +1.79% and a Zacks Rank #3, which is a favorable combination that indicates a likely positive earnings surprise this season. (Read more: :Is a Beat in the Cards for PPL Corp in Q3 Earnings?)
Consolidated Edison (ED - Free Report) delivered an average positive earnings surprise of 2.01% in the last four quarters. Consolidated Edison’s regulated utilities continue to provide the company with a stable earnings base coupled with positive outcomes from the rate hike appeal by its utilities.
Consolidated Edison has an Earnings ESP of +1.04% and a Zacks Rank #3, which is a favorable combination, indicating a likely positive earnings surprise this season. (Read more: :Is Consolidated Edison Poised to Beat on Q3 Earnings?)
NiSource Inc. (NI - Free Report) came up with a negative earnings surprise of 22.22% in the last reported quarter. The company recovered 75% of its infrastructure investments in less than 12 months, which provides a clear visibility of future earnings growth.
NiSource has an Earnings ESP of +3.45% and a Zacks Rank #4 (Sell). (Read more: NiSource to Report Q3 Earnings: What's in the Cards?)
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