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PG&E Corp. (PCG) to Post Q3 Earnings: What's in the Cards?

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PG&E Corporation (PCG - Free Report) is set to report third-quarter 2018 results on Nov 5, before the opening bell.

In the last reported quarter, the company came up with a positive earnings surprise of 22.11%. Moreover, its bottom line surpassed the Zacks Consensus Estimate in two of the trailing four quarters, the average beat being 5.23%.

Let’s see, how things are shaping up at the company prior to this announcement.

Pacific Gas & Electric Co. Price and EPS Surprise

Factors at Play

Warmer-than-normal temperature was witnessed in PG&E Corp.’s service territory during the third quarter, indicating increased electricity demand. This in turn, is likely to boost the company’s quarterly revenues. In line with this, the Zacks Consensus Estimate for the top line is pegged at $4.55 billion, reflecting a 0.7% year-over-year increase.

Following the latest U.S. tax reform, the company expects its rate base to increase $500 million in 2018. Management anticipates to generate earnings of 25 cents per share from this rate base growth in 2018, translating into an annual improvement from the 2017-level. Considering this, we might project the rate base rise to boost the company’s bottom line in the third quarter as well.

If the company’s several petitions for cost recovery, in relation to wildfire and other natural calamity related damages, are not approved, the same is likely to weigh on its quarterly earnings growth. So the rate base growth expectations are offset by these cost enhancement expectations.

In line with this, the Zacks Consensus Estimate of $1.12 per share for PG&E’s quarterly earnings reflects no change from the year-ago quarter’s figure.

Earnings Whispers

Our proven model does not conclusively show that PG&E Corp. is likely to beat estimates in the upcoming quarterly release. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Earnings ESP: PG&E Corp. has an Earnings ESP of -0.78%, representing the percentage difference between the Most Accurate Estimate of $1.11 per share and the Zacks Consensus Estimate of $1.12. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PG&E Corp. has a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative earnings ESP combined with Zacks Rank #3 leaves surprise prediction inconclusive.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look

Here are a few stocks in the Utility – Electric Power space that you may want to consider as our model shows that these have the right combination of elements to beat on earnings in the upcoming releases:

The AES Corporation (AES - Free Report) has an Earnings ESP of +1.43% and a Zacks Rank #2. It is expected to report third-quarter 2018 earnings on Nov 6. You can see the complete list of today’s Zacks #1 Rank stocks here.

PNM Resources, Inc. (PNM - Free Report) has an Earnings ESP of +1.21% and a Zacks Rank of 2. It is expected to report third-quarter 2018 earnings on Nov 6.

The Southern Company (SO - Free Report) has an Earnings ESP of +0.37% and is a Zacks #2 Ranked stock. The company is anticipated to report third-quarter 2018 earnings on Nov 7.

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