The Utility sector has positive earnings growth expectations for the fourth quarter. Among the 75 members of the S&P 500 that have already reported fourth-quarter results, there is only one utility stock namely NextEra Energy (NEE). The company missed earnings estimates by 6.5%. That said, the utility sector’s fourth-quarter 2019 earnings are expected to rise 15.4% year over year on 4.7% revenue growth. For more details on quarterly releases, you can go through the latest Earnings Outlook.
Factors Likely to Drive Q4 Results
Mature Utility companies are domestic focused and provide 24x7 basic services. They consistently make huge investments to maintain their infrastructure and carry out upgrades on a regular basis. These companies need constant funding to continue the capital projects. Three rate cuts since July 2019 are likely to have lowered utilities’ cost of capital, which in turn might have positively impacted margins and the bottom line.
Moreover, proper cost-management initiatives, increasing operating efficiencies, focus on environment-friendly generation, addition of energy storage projects, launch of technologies to maintain transmission and distribution lines, as well as gradual introduction of smart meters have improved service quality and reliability. Customer growth and new rates in their service territories are likely to have made a positive impact on Utilities’ fourth-quarter earnings.
Utilities to Watch Out for
Let's take a look at some Utility stocks that are scheduled to report fourth-quarter 2019 earnings on Jan 30.
Xcel Energy Inc. XEL delivered an average negative earnings surprise of 4.3% in the last four quarters. The company’s fourth-quarter earnings are expected to have gained from drop in operating costs in nuclear operation and lower fossil plant outage in second-half 2019.
Xcel Energy Inc. Price and EPS Surprise
Xcel Energy Inc. price-eps-surprise | Xcel Energy Inc. Quote
Our proven model doesn’t conclusively predict an earnings beat for Xcel Energy 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. You can see the complete list of today’s Zacks #1 Rank stocks here.
Xcel Energy has an Earnings ESP of -2.35% and a Zacks Rank #3. (Read more: What's in the Cards for Xcel Energy's Q4 Earnings?)
CMS Energy Corporation CMS delivered an average negative earnings surprise of 3.1% in the trailing four quarters. The company and its subsidiaries are engaged in transmission and distribution of electricity and natural gas to customers. CMS Energy has a Zacks Rank #3 and an Earnings ESP of 0.00%. (Read more: CMS Energy to Post Q4 Earnings: What's in the Cards?)
CMS Energy Corporation Price and EPS Surprise
CMS Energy Corporation price-eps-surprise | CMS Energy Corporation Quote
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