Will Xcel Energy Beat Revenue Estimates in 4Q15?

Analysts Expect a 19% Rise in Xcel Energy's 4Q15 Earnings

(Continued from Prior Part)

Actual revenues versus estimates

Wall Street analysts expect Xcel Energy’s (XEL) revenues to come in at $3.5 billion in 4Q15. For the comparable period last year, XEL reported revenues of $2.9 billion. This amounts to a 20% rise in revenues year-over-year. However, in the last three quarters, XEL has been missing revenue estimates.

Revenue drivers

Xcel Energy has been experiencing lower electricity usage per customer for the last couple of quarters. In the nine months ended September 30, 2015, its weather-normalized electric sales were down 0.2% compared to the first nine months of 2014. However, this lower usage was partially offset by growth in the company’s customer base.

XEL’s principal territories, Minnesota and Texas, had better economic conditions, which resulted in customer additions of 1% year-over-year in 3Q15. Economic conditions such as growth in employment and the housing sector are expected to remain, which may continue to positively impact XEL’s revenues in 4Q15.

In XEL’s main service territories, the average unemployment rate was 3.6% in 3Q15 compared to the national rate of 5.1%. XEL’s management is expecting its customer base growth to continue in 4Q15.

Electric business contributes 90% to XEL’s total revenues. The remaining ~10% comes from its natural gas operations. Due to the slow growth of the electric business, many utilities are expanding their portfolios to include natural gas (UNG) operations. Duke Energy (DUK) is acquiring Piedmont Natural Gas (PNY), while Southern Company (SO) is acquiring AGL Resources (GAS).

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Browse this series on Market Realist:

• Part 1 - Increased Rates to Drive Xcel Energy’s Earnings in 4Q15

• Part 3 - No Analysts Recommend a “Sell” on Xcel Energy