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Utility Stock Q3 Earnings Roster for Oct 30: SO, ETR & More

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A handful of utilities, precisely 3.6% of the Utility sector, have released their Q3 figures, which were better than analysts’ expectation on both counts. Notably, the companies recorded earnings growth of 11.9% on revenue growth of 26.1%. We expect utilities to have witnessed top- and bottom-line year-over-year growth this earnings season.  

Factors Likely to Drive Q3 Results

The Federal Reserve’s decision to lower the nation’s interest rates in July and September is likely to have acted as a key growth catalyst for the capital-intensive utility stocks. The interest rate cuts are expected to have lowered utilities’ cost of capital, which, in turn, is likely to have positively impacted margins and thereby the bottom line.

Moreover, factors like new rates in their service territories, customer growth coupled with effective management and control of expenses through the introduction of technologies are likely to have boosted utilities’ third-quarter earnings. During the quarter, mature utilities gained from the launch of technologies to maintain transmission and distribution lines, and gradual introduction of smart meters in their service territories for improving the resilience of services.

Q3 Predictions

For the domestic-focused matured Utility sector, Q3 earnings are expected to increase 4.7% year over year on 4.5% higher revenues.

Impressively, Utility is one of the six Zacks sectors (out of 16) that are likely to come up with improved year-over-year earnings in the current reporting cycle. For more details on quarterly releases, you can go through the latest Earnings Outlook.

Utilities to Watch

Let's take a look at some Utility stocks that are scheduled to report third-quarter 2019 earnings on Oct 30 and find out how things have shaped up prior to the announcements.

Southern Company (SO - Free Report) outperformed the Zacks Consensus Estimate in the trailing four quarters, the average being 5.46%. The company added 23,000 residential electric and 14,000 residential gas customers in the first half of 2019, a trend that has most likely continued in the third quarter, thanks to healthy population and job growth across its electric and gas franchises. However, its Q3 results are expected to reflect the impact of the ongoing trade war with China and a stronger U.S. dollar.

According to the Zacks model, a company needs the right combination of two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Southern Company has an Earnings ESP of 0.00% and a Zacks Rank #2 (Buy), which makes surprise prediction difficult (read more: Southern Company to Report Q3 Earnings: What to Expect ).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Southern Company (The) Price and EPS Surprise

Southern Company (The) Price and EPS Surprise

Southern Company (The) price-eps-surprise | Southern Company (The) Quote

Entergy Corp. (ETR - Free Report) delivered average negative earnings surprise of 10.82% in the trailing four quarters. During the third quarter, majority of the company’s service territories witnessed warmer-than-expected weather. This is expected to have contributed to the company’s third-quarter revenues. However, the upcoming results may reflect increased expenses for the company on account of the storms that its service territories faced in the third quarter.

Entergy has a Zacks Rank #2 and an Earnings ESP of 0.00% (read more: What's in Store for Entergy This Earnings Season?).

Entergy Corporation Price and EPS Surprise

Entergy Corporation Price and EPS Surprise

Entergy Corporation price-eps-surprise | Entergy Corporation Quote

NiSource Inc. (NI - Free Report) delivered average positive earnings surprise of 18.97% in the trailing four quarters. At the end of the second quarter as well as the third quarter, NiSource’s new electric and gas rates were put into effect in different service territories. Hence, the rates are likely to have made an impact on the company’s third-quarter performance.

NiSource has a Zacks Rank #3 and an Earnings ESP of 0.00% (read more: What's in the Cards for NiSource This Earnings Season?).

NiSource, Inc Price and EPS Surprise

NiSource, Inc Price and EPS Surprise

NiSource, Inc price-eps-surprise | NiSource, Inc Quote

American Water Works Company, Inc. (AWK - Free Report) delivered average positive earnings surprise of 0.07% in the trailing four quarters. Acquisitions closed till July 2019 added 30,700 customers, which will positively reflect on third-quarter results. In addition, new water rates that came into effect at the end of the second quarter and during the third quarter are anticipated to have positively impacted its third-quarter earnings.  

American Water has a Zacks Rank #3 and an Earnings ESP of +1.17% (read more: Will Acquisitions Boost American Water's Q3 Earnings?).

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