Utility stocks started the earnings season on a strong note, with NextEra Energy NEE delivering positive earnings as well as revenue surprise. For the domestic-focused matured Utility sector, total Q1 earnings are expected to increase 3.5% year over year despite 0.4% lower revenues.
Impressively, Utility is one of the six among the 16 Zacks sectors 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 our latest Earnings Preview.
Factors Likely to Boost Q1 Results
New electric and water rates, increase in customers along with proper cost-management initiatives are likely to have had a positive impact on utilities’ earnings. Domestic-focused mature utilities have been benefiting from the usage of new technologies, which enable them to maintain transmission and distribution lines. These factors must have boosted utility stocks’ earnings in the first half of the first quarter.
In the second half of the January-March quarter, the impact of the novel coronavirus was felt on the U.S. economy. Nevertheless, we expect demand for utilities to have been relatively unaffected by the crisis. This is because while commercial and industrial sales volumes went down, residential sales were up as a big portion of the workforce stayed at home and worked remotely.
Moreover, the pandemic forced the Federal Reserve to slash the nation’s interest rates to 0-0.25%.
Interestingly, the Utility sector tends to benefit when the rates are down, as it helps utilities to get funds from the market at a cheaper rate and continue with infrastructure strengthening initiatives. So, the near-zero interest rate must have acted as a key growth catalyst for capital-intensive utility stocks in the first quarter. Moreover, ever since the virus started spreading in the United States, utility providers have adopted significant contingency plans to offset the negative effects.
All these developments are likely to have had a positive impact on Utilities’ first-quarter earnings. However, warmer-than-normal temperature in a few states might have weighed on revenues.
Utilities Earnings in Focus
Let's take a look at some Utility stocks that are scheduled to report earnings on May 6.
American Electric Power Company, Inc.’s AEP four-quarter average positive earnings surprise is 5%. The company’s first-quarter earnings are expected to have been dragged down by higher operating and maintenance cost related to the notable storm activities that hit its service areas in the first quarter. However, favorable weather conditions and base rate outcomes are likely to have boosted revenues.
Our proven model doesn’t conclusively predict an earnings beat for American Electric this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
The company has an Earnings ESP of 0.00% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
(Read more: What's in Store for American Electric in Q1 Earnings?).
American Electric Power Company, Inc. Price and EPS Surprise
American Electric Power Company, Inc. price-eps-surprise | American Electric Power Company, Inc. Quote
NiSource, Inc. NI delivered average negative earnings surprise of 21.59% in the last four quarters. The company’s first-quarter results are likely to reflect positive impacts of new electric and gas rates, effective from December 2019 and January 2020.
The company has an Earnings ESP of 0.00% and carries a Zacks Rank #3 (read more: What's in the Cards for NiSource This Earnings Season?).
NiSource, Inc Price and EPS Surprise
NiSource, Inc price-eps-surprise | NiSource, Inc Quote
Atmos Energy Corp.’s ATO average four-quarter positive earnings surprise is 1.91%. The company’s second-quarter fiscal 2020 results are likely to reflect increased rate base and higher residential sales.
The company has an Earnings ESP of 0.00% and sports a Zacks Rank #1 (read more: Atmos Energy to Report Q2 Earnings: What's in Store?)
Atmos Energy Corporation Price and EPS Surprise
Atmos Energy Corporation price-eps-surprise | Atmos Energy Corporation Quote
American Water Works Company, Inc.’s AWK four-quarter average negative earnings surprise is 0.02%. The company’s first-quarter earnings are likely to have benefited from increased residential sales as stay-at-home orders to prevent the spread of virus must have boosted residential demand for water.
The company has an Earnings ESP of -0.39% and carries a Zacks Rank #2 (read more: American Water to Report Q1 Earnings: What to Expect).
American Water Works Company, Inc. Price and EPS Surprise
American Water Works Company, Inc. price-eps-surprise | American Water Works Company, Inc. Quote
Fortis Inc. FTS earnings matched estimates in the last reported quarter. The company’s four-quarter average positive earnings surprise is 6.31%.
The company has an Earnings ESP of 0.00% and carries a Zacks Rank #3.
Fortis Inc. Price and EPS Surprise
Fortis Inc. price-eps-surprise | Fortis Inc. Quote
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American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
NiSource, Inc (NI) : Free Stock Analysis Report
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