After a burst of first-quarter utility earnings releases early this week, we are gearing up for the next onslaught of reports through the week. So far, 72.8% of the market cap of the S&P 500 index has reported results. This week, nearly 88% of the index members will report results.
As of Apr 29, 2016, utilities comprising 40.7% of the market cap have reported Q1 results. Reported earnings show a 5.5% decline in first-quarter earnings on a 12.4% decrease in revenues. Earnings are estimated to decline 5.4% on a 1.7% dip in revenues. For further details on earnings releases you can go through our Earnings Trend report.
The majority of utility earnings in the first quarter were, to some extent, hurt by warmer-than-expected temperatures this winter. However, a gradually declining unemployment rate, low interest rate and the sector’s investment initiatives put the companies in a better position than most of the other S&P 500 index members.
Let’s take a look at some utilities that are scheduled to report first-quarter earnings this week.
Dominion Resources, Inc. D, a Zacks Rank #3 (Hold) stock, is set to report first-quarter 2016 results before the market opens on May 4. Last quarter, Dominion Resources recorded a negative earnings surprise of 19.54%. Dominion Resources expects to benefit from its projects, lower capacity expenses and investment tax credits from its solar facilities. However, higher depreciation, interest costs and share dilution could hurt the company’s first-quarter results. (Read more: Will Warm Weather Hurt Dominion Earnings in Q1 Again?).
The above chart indicates that Dominion Resources was able to deliver positive surprises in two of the last four quarters. However, due to larger negative surprises in the other two quarters, the overall average surprise was a negative 4.46%.
Eversource Energy ES will release first-quarter 2016 financial results before the market opens on May 5. In the prior quarter, the company reported a negative earnings surprise of 7.69%. Eversource has shifted around 1,000 customers to natural gas in January and expects customer growth to continue, going ahead.
In fact, this Zacks Rank #3 (Hold) company expects to add nearly 12,500 to its natural gas customer base in 2016. However, the company’s service territories experienced historically warm temperatures last December. We believe warmer-than-expected temperatures in the first quarter will likely dampen the company’s revenues. (Read more: What Awaits Utility Stock Eversource in Q1 Earnings?).
The above chart indicates that Eversource Energy was able to beat earnings estimates in two of the last four quarters. The average positive earnings surprise was 2.86%.
PG&E Corporation PCG will release first-quarter 2016 financial results before the market opens on May 4. Last quarter, the company had delivered a positive earnings surprise of 11.11%. It carries a Zacks Rank #3 (Hold). In Sep 2015, PG&E Corporation submitted a request to the California Public Utilities Commission to hike rates by about $4 per month for an average residential customer. The rate hike will provide the utility necessary funds to continue its work on infrastructure upgrade, strengthen and expand existing systems, and ultimately provide reliable services to its customers. However, an unseasonably warm winter is expected to affect demand, in turn hurting revenues. (Read more: PG&E Corporation Q1 Earnings: What's in the Cards?).
The above chart indicates that PG&E Corporation delivered positive earnings surprises in three of the last four quarters. The average positive earnings surprise was 12.13%.
Sempra Energy SRE, a Zacks Rank #4 (Sell) stock, is set to report first-quarter 2016 results before the opening bell on May 4. Last quarter, Sempra Energy recorded a 12.21% positive earnings surprise. The company continues to make systematic investments in infrastructure development projects. It expects capital expenditure and investment for 2016 to be approximately $5.1 billion. However, any adverse decision in the upcoming General Rate Case and Cost-of-Capital proceedings can substantially dampen its earnings. (Read more: Sempra Energy Q1 Earnings: Stock to Disappoint?).
The above chart indicates that Sempra Energy delivered a positive earnings surprise in all of the last four quarters. As a result, the average positive earnings surprise was 15.81%.
Bottom Line
Given the large number of S&P 500 earnings releases scheduled for this week, investors are expected to watch out for the quarterly results of these utility companies.
Keep an eye on our full earnings articles to see how these stocks finally fared this season.
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